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Differing Interests, Conflicts & Waiver and Consent 101

Differing Interests, Conflicts & Waiver and Consent 101

Differing interests between a lawyer and a client are defined as “every interest that will adversely affect either the judgment or the loyalty of a lawyer to a client, whether it be a conflicting, inconsistent, diverse, or other interest.” (RPC 1.0 (f))

Clearly, differing interests—which include conflicts of interest, and the restrictions upon a lawyer’s actions relating to them—is an extremely expansive and highly nuanced topic and will not be discussed in detail in this article. However, broadly stated, any time a lawyer is in a position where the lawyer or firm might be influenced by their own personal, business, or other interests, which could impact their duty of loyalty to one or more of their clients, the situation must be scrutinized and measured against the applicable Rules.

In any potential or actual differing-interest situation, the lawyer has certain obligations to the client and the profession that must be observed. Rules are extremely specific. They are set forth in RPC 1.7 through RPC 1.13. This article will address only the general concepts of differing interests and waiver and consent under RPC 1.7. Subsequent articles will address the other areas of conflicting and differing interests.

RPC 1.7 states that in pertinent part a lawyer:

“shall not represent a client if a reasonable lawyer would conclude that either:

(1) the representation will involve the lawyer in representing differing interests; or

(2) there is a significant risk that the lawyer’s professional judgment on behalf of a client will be adversely affected by the lawyer’s own financial, business, property, or other personal interests.” RPC 1.7 (a)

That rule goes on to further explain that if differing interests exist, or may exist, a lawyer may only represent the client on that matter 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 another proceeding before a tribunal; and

(4) each affected client gives informed consent, confirmed in writing.” RPC 1.7 (b)

While RPC 1.7 is fairly straightforward in its intention and goals, the above-underlined terms are extremely important.

The rules regarding differing interests will be judged by an objective “reasonable lawyer” standard. RPC 1.0 (q) states that “Reasonable” or “reasonably,” when used in relation to conduct by a lawyer, denotes the conduct of a reasonably prudent and competent lawyer. When used in the context of conflict of interest determinations, “reasonable lawyer” denotes a lawyer acting from the perspective of a reasonably prudent and competent lawyer who is personally disinterested in commencing or continuing the representation.

While RPC 1.7 (b) seems to apply a subjective standard to the decision by a lawyer to undertake representation where differing interests exist, by stating that a lawyer may undertake or continue representation if the lawyer reasonably believes he can meet the exceptions set forth therein, that is not accurate. RPC 1.0 (r) states that “Reasonable belief” or “reasonably believes,” when used in reference to a lawyer, denotes that the lawyer believes the matter in question and that the circumstances are such that the belief is reasonable. (emphasis added) As noted above, that reasonable belief will be judged by the objective reasonably prudent disinterested attorney standard.

If a lawyer has a legitimate reasonable belief that he can represent a client even though differing interests exist, the rules are very specific that the lawyer must obtain informed consent from each and every affected client before undertaking or continuing representation.

Informed consent, under RPC 1.0 (j) “denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated information adequate for the person to make an informed decision, and after the lawyer has adequately explained to the person the material risks of the proposed course of conduct and reasonably available alternatives.” This requires that the lawyer explains to the client that a differing interest exists, explains the import of having differing interests, describes the potential risk of that situation, and provides that information sufficient for the client(s) to make an informed decision as to how to continue.

Moreover, the informed consent and the requirements under RPC 1.0 (j) must be “confirmed in writing”; as described in Rule 1.0 (e). This Rule requires language sufficient to demonstrate that the client has given actual consent. It is worth noting that the language of Rule 1.0 (e) refers only to confirm that consent has been given. I believe this to be an oversight by the drafters. Absent some valid reason not to do so, it is advisable to include in that writing the warnings and notices required under Rule 1.0 (j). This would be the best way to prove that you have complied with the requirements of informed consent. As always, the burden of proving compliance remains with the lawyer if challenged by an enforcing agency.

Lastly, keep in mind that there are certain differing-interest situations that cannot be cured by disclosure and consent. A lawyer cannot represent clients with adverse claims (Greene v. Greene 418 N.Y.S.2d 379) or where the representation is prohibited by law (RPC 1.7 (b)) or by other disciplinary rules. A lawyer representing a client in a real estate matter cannot also act as a real estate agent or derive any benefit from the broker’s fee, nor can they refer the matter to a title company in which they have an interest (except for purely ministerial work) (NCBA Op. 89-33; NYSBA Op. 753), and they may not earn a fee for placing the mortgage (NCBA Op. 89-46).