Omar Bennett
A conflict of interest is an ethical dilemma that arises when an individual or organisation is involved in multiple interests, and serving one of those interests could involve working against another. In the legal profession, conflicts of interest are taken very seriously, as they can have serious consequences for both lawyers and their clients. The American Bar Association (ABA) has developed the Model Rules of Professional Conduct to guide lawyers in their professional responsibilities to past, present, and future clients. The duty of loyalty is the highest duty a lawyer owes to their client, and conflicts of interest can arise when a lawyer's personal interests are adverse to those of their client. This can occur when a lawyer represents multiple clients with conflicting interests or when a lawyer's own interests take precedence over those of their client.
| Characteristics | Values |
|---|---|
| Lawyer's personal interests are adverse to an existing client | Conflict of interest |
| Lawyer enters into a business transaction with a client | Conflict of interest |
| Lawyer acquires ownership, possessory, security or other pecuniary interest adverse to a client | Conflict of interest |
| Lawyer represents a client in a matter and then represents another person in the same or a substantially related matter with materially adverse interests | Conflict of interest |
| Lawyer switches sides or terminates the relationship with an existing client to represent a new, more appealing client | Conflict of interest |
| Lawyer's duty of loyalty to a client is compromised by their interests or duties to another client, former client, or third person | Conflict of interest |
| Lawyer's ability to act in the best interests of a client is materially limited by their other responsibilities or interests | Conflict of interest |
| Lawyer is required to cross-examine a client who appears as a witness in a lawsuit involving another client | Conflict of interest |
| Lawyer represents multiple clients in the same case | Conflict of interest |
| Lawyer fails to conduct a conflict check or notify clients of potential conflicts | Potential conflict of interest |
| Lawyer represents both the policyholder and the insurer in an insurance claim | Potential conflict of interest |
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What You'll Learn
Loyalty to the client
The duty of loyalty requires that lawyers act in the best interests of their clients at all times. This includes not only providing sound legal advice but also exercising independent professional judgment. Lawyers must be able to zealously represent their clients' interests and advocate for them without allowing their own interests to get in the way. For example, a lawyer must not enter into a business transaction with a current client or acquire any pecuniary interest adverse to the client, as per ABA Model Rule 1.8. An example of this would be purchasing property from a client at a below-market rate.
Conflicts of interest can also arise when a lawyer represents multiple clients with conflicting interests. In such cases, the lawyer must ensure that their representation of one client does not materially limit their ability to represent the other client effectively. For instance, a lawyer cannot represent both the buyer and the lender in a residential real estate transaction, as per ABA Model Rule 1.9. Similarly, a lawyer cannot represent multiple individuals forming a joint venture, as their duty of loyalty to one client may limit their ability to recommend all possible positions to the other clients.
In addition, lawyers must be mindful of conflicts that may arise with former clients. According to ABA Model Rule 1.9, a lawyer who has formerly represented a client cannot subsequently represent another person in the same or a substantially related matter where the interests of the new client are adverse to those of the former client. This is to protect the confidentiality and loyalty owed to the former client.
Conflicts of interest can have serious consequences for both lawyers and clients. Lawyers must conduct conflict checks and notify clients of any potential conflicts prior to accepting them as clients. Full disclosure and informed consent are often required to resolve or prevent conflicts of interest.
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Business transactions with clients
Business transactions between lawyers and their clients are often subject to scrutiny, and for good reason. A lawyer's duty is to always represent the best interests of their client, and conflicts of interest can interfere with this duty.
A conflict of interest arises when a lawyer enters into a business transaction with a client or acquires an ownership, possessory, security, or other pecuniary interest adverse to the client. This type of conflict often occurs when a lawyer enters into a business transaction with a client after the formation of the attorney-client relationship. For example, a lawyer may purchase property from a client at a below-market rate or draft a will in which they are named as a beneficiary. In such cases, the lawyer's ability to provide detached advice may be compromised, and their loyalty may be divided.
To avoid conflicts of interest in business transactions with clients, lawyers must ensure that the transaction is fair and reasonable for the client and that the terms are set forth in writing in a language the client can understand. The client should also be advised of their right to consult with independent counsel and provide informed consent.
In some cases, a lawyer may not be prohibited from engaging in business dealings with a client. For example, if a lawyer reasonably believes they can adequately represent the client, the representation is not prohibited by law, and the client consents after full disclosure. However, even in these cases, business dealings between lawyers and their clients are subject to searching scrutiny, and lawyers must be cautious not to allow their personal interests to interfere with their professional judgment.
The consequences of a conflict of interest can be severe for lawyers. They may face legal malpractice suits, disciplinary proceedings, suspension or loss of their law license, disqualification, public scrutiny, and financial losses. Therefore, it is essential for lawyers to carefully consider any potential conflicts of interest before engaging in business transactions with clients and to prioritize their duty of loyalty and independent judgment to their clients.
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Representing clients with conflicting interests
A conflict of interest arises when a lawyer's interests, those of another client, or those of a third party conflict with those of the present client. This can occur when a lawyer is representing multiple clients with conflicting interests, such as the plaintiff and defendant in the same case, or when the lawyer's personal interests are adverse to those of the client.
In some cases, a conflict of interest may exist even if the lawyer is not directly representing both parties in the same matter. For example, a lawyer may be unable to effectively represent a client if they have a duty of loyalty to a former client or a third person with adverse interests. This is known as a "concurrent conflict of interest".
When representing clients with conflicting interests, lawyers must be mindful of their duty of loyalty to all clients and exercise independent professional judgment. They must also make full disclosure of all possible outcomes of a case, including the potential impact of the conflict on the representation.
To manage conflicts of interest, lawyers can obtain informed consent from all affected clients, withdraw from the representation, or refer the client to another lawyer. However, it is important to note that a lawyer cannot represent a client with a conflict if doing so would violate their duty of loyalty or compromise their independent professional judgment.
State bar associations have different rules regarding the representation of clients with conflicting interests, and lawyers should refer to the specific guidelines in their jurisdiction.
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Working with former clients
Secondly, a lawyer must not represent a new client if their interests are materially adverse to those of a former client. This is a broad concept and can include situations where the new client's interests are legally, financially, or otherwise detrimentally affected by the lawyer's previous representation. For example, a lawyer who has represented a client in a residential real estate transaction cannot subsequently represent the lender in a foreclosure action.
Thirdly, a lawyer must not abandon their duty of loyalty to a former client. This means that a lawyer cannot terminate the relationship with a client to pursue a more lucrative opportunity with another client. The "hot potato" doctrine prevents an attorney from switching sides by getting rid of an existing client so that they can take on a new, more appealing client.
It is important to note that conflicts of interest may be waived if all affected parties give informed consent. This consent must be in writing, and the lawyer must reasonably believe that they can provide competent and diligent representation to all clients. However, even with consent, a lawyer may not represent clients with conflicting interests if the cases are “directly adverse" to one another, meaning the lawyer cannot represent the clients against each other.
In conclusion, when working with former clients, lawyers must be vigilant in identifying and resolving conflicts of interest to uphold their duties of loyalty, confidentiality, and independent judgment.
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Confidentiality and conflict
The duty of loyalty is paramount in the legal profession, and lawyers must always act in the best interests of their clients. This duty of loyalty includes maintaining client confidentiality. Clients must be able to disclose all relevant facts to their attorney without fear that the information will be used against them or that their attorney's judgment will be impaired by a conflict of interest.
Conflicts of interest can arise in various situations, such as when a lawyer has previously represented a client in a matter and then seeks to represent another party in a substantially related matter where the interests of the two clients are adverse. In such cases, the lawyer must obtain informed consent from the former client or withdraw from the representation.
Another example of a conflict of interest is when a lawyer represents multiple clients in the same matter, such as representing both the plaintiff and the defendant in a lawsuit. In this scenario, the lawyer's duty to one client may conflict with their duty to the other, and it would be challenging to fulfil both duties simultaneously.
To prevent conflicts of interest, lawyers must conduct conflict checks when accepting new clients, including completing questionnaires to identify potential conflicts. If a conflict arises after representation has begun, the lawyer must typically withdraw from the case unless they obtain informed consent from the client.
In summary, confidentiality and conflict are critical issues in the legal profession, and lawyers must diligently work to avoid conflicts of interest that could compromise their duty of loyalty and confidentiality to their clients.
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Frequently asked questions
A conflict of interest arises when a lawyer's personal interests or duties to another party conflict with the interests of the current client. This could be due to the lawyer's own interests, duties to another client, or a third party.
The American Bar Association (ABA) has devised the Model Rules of Professional Conduct, which all state bar associations have adapted. The basic rule is that a lawyer cannot represent a client if there is a concurrent conflict of interest, i.e., if there is a substantial risk that the lawyer's representation will be adversely affected by their own interests or duties to another party.
Examples include when a lawyer enters into a business transaction with a client, such as purchasing property at a below-market rate, or drafting a will where the lawyer is a beneficiary. Another example is when a lawyer represents both the plaintiff and defendant in the same case, making it impossible to advocate for both parties' interests simultaneously. Additionally, conflicts of interest can arise in the insurance industry when an attorney represents both the policyholder and the insurer, and the latter takes actions that harm the interests of the former.
