Speaker 1: I'm Drew Stevenson. This is for my professional responsibility class. Here, I'm going to be introducing our biggest subject of the course, which is conflicts of interest. I'm going to start with model rule 1.7. This is sort of our quick overview or introductory lecture. So let's dive in. Model rule 1.7 is about concurrent conflicts of interest. In other words, people that you are representing at the same time or in the present. We'll have other conflicts rules about former clients that we'll get to later on in the course, but this is where we start. And for our purposes, this is our kind of main conflicts rule. According to the MPRE examiners, conflicts of interest overall is the most heavily tested subject on that test. Now there's going to be several rules about conflicts, 1.7, 1.8, all the way to 1.12, but 1.7 is the big rule or the one that the ABA has written the most comments for and that you are most likely to encounter in test questions. So this is where we're going to start. When you're in practice as a lawyer, it's important to keep in mind that conflicts of interest are the area that's most likely to generate legal malpractice claims, at least according to the insurance companies that have to write the check or pay out the claims when something goes wrong. The insurers say that by far, out of all the mistakes that lawyers make, conflicts of interest is the one that generates the most claim payouts for malpractice liability and the largest claims for legal malpractice liability. The rules here are a little complicated and difficult for lawyers to apply in practice. Some of the rules we're going to study later on in the course are, by comparison, are rather cut and dry and straightforward. But a lot of our conflicts questions are going to involve a judgment call and some uncertainty at the margins. So let's start talking about model rule 1.7 itself. Section A starts with, except as provided in paragraph B, a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. By the way, that means you either have to decline the representation or withdraw from representation that's already underway. A concurrent conflict of interest exists if, one, the representation of one client will be directly adverse to another client. And by that we mean they are on opposite sides of litigation or on opposite sides of a transaction like the buyer and seller, where they have really conflicting legal interests. Or, two, there's a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, or a former client, or a third party, or by a personal interest of the lawyer. So what you'd need to get out of this is that there's two broad categories of conflicts of interest. I made a diagram here. We have directly adverse conflicts and what we call material limitation conflicts. So we start with, A opens with this kind of general prohibition. You shall not represent a client if there's a concurrent conflict of interest. And then there's two basic categories of conflicts, those that are directly adverse, where you have clients whose legal interests are pitted against each other, either in potential litigation or transactional matters, or a material limitation. And just for simplification at this point, you should think of material limitation as undue influence or bias, or at least the appearance of bias on the part of the lawyer. There's something that is interfering or affecting the lawyer's independent professional judgment. Now, remember that A said, except as provided in section B, so let's look at B. It says, notwithstanding a concurrent conflict of interest, a lawyer may represent a client if these four conditions are met. In other words, even when a conflict exists, you can proceed with the representation if you satisfy these four elements. Number one, the lawyer reasonably believes that the lawyer will be able to provide diligent and competent representation to each affected client. Two, the representation is not prohibited by law. We'll come back to that later. Three, 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 four, each affected client gives informed consent confirmed in writing. So even if all these the first three conditions are met, you still have to have each affected client understand the conflict of interest and put it in writing. And you should anticipate for multiple choice questions, some gotcha questions where the lawyer didn't get it in writing, you actually have to get consent to conflicts in writing and it has to be informed consent. For number three, a lot of times in class, I call that the sitcom scenario where you have the lawyer trying to be the plaintiff's lawyer and the defense lawyer in the same trial or case. And I call it that because occasionally I'll see a sitcom where they do an episode like this, where the lawyer is running back and forth between the plaintiff's and defense tables in the courtroom and objecting to his own motions and giving closing arguments for each side to the jury and so forth. Well, that's ridiculous. That's why they do it in sitcom sometimes. And in real life, you're not allowed to do that at all. Now that's a really severe type of conflict of interest. But as a rule of thumb, if you get a test question that you're not sure about, if the same lawyer is representing the parties on each side of the V in the title or caption of a case, something's wrong. The lawyer should not be representing the plaintiff and the defendant if there's a V separating them in the case. Let's take a moment now to talk about conflicts of interest and the different types, especially the different types of directly adverse conflicts. So I'm going to start with the simple sort of classic scenario. Let's say a lawyer already has two clients that he's been representing, and I'm going to call them Greenacre and Redacre on unrelated matters. And let's say he's doing a contract for one and drafting a will for the other. A conflict arises when some new unforeseen legal dispute arises between Greenacre and Redacre, and they both think that the lawyer, that is you, are their attorney for the case. So let's say these two clients who you represent on unrelated matters get an offender vendor in your parking lot, and one of them wants to sue the other for the damage to their car, and they want you to represent them. The problem is that the opposing party is also your client, not necessarily for that matter, but for a will or a contract that you're drafting for them. This can also happen with a new client who comes in the door and wants to sue one of your existing clients. So let's say you represent Redacre on a contract matter, and now Greenacre schedules a consultation and comes in and says that they want to sue Redacre in a personal injury lawsuit. And so even though you don't represent Redacre for that lawsuit, you're doing a contract claim matter for them, drafting a contract, that you have a conflict because the opposing party in this lawsuit is the one that you represent on an unrelated matter. That's our classic scenario of directly adverse clients. But there's a second type of directly adverse clients for conflicts of interest, and this is joint representation. This is where you decide to agree to represent co-plaintiffs or co-defendants in a matter. And it could also be co-buyers or co-sellers in a transaction. But let's say it's co-defendants or co-plaintiffs. Very common that co-defendants or co-plaintiffs want to share a lawyer. It saves legal fees and simplifies things and so forth. Well, the problem is that sometimes co-clients file cross claims against each other or their insurer does, let's say. Even more common, they have a disagreement among them about whether to settle a case before trial or when to settle or how much to settle for or how they're going to divide the settlement between them. So this was very foreseeable if you represent co-plaintiffs or co-defendants that they will disagree among themselves about how to handle the case when there's a big decision to make and now you have a problem. They could also end up testifying against each other, right? So they might end up sort of making it sound like one of the others is contributorily negligent or is more blameworthy in the situation or that they didn't suffer as much harm, whatever it is. Or it could just be that their stories are contradictory enough that each one will undermine the other's credibility and that could create a conflict of interest. It's even more serious when you're doing criminal defense work and you want to represent co- defendants, let's say accomplices in a crime who are being charged together. In our country, prosecutors are allowed sometimes to charge accomplices to a crime as a group or together in the same trial. And if they are sharing a lawyer, well, the prosecutor might offer a plea bargain or a generous deal to one of them to testify against the other. Let's say it's a really generous deal. They will have immunity or no jail time. Well, the problem is that normally their lawyer would probably recommend that they take that deal. But in this case, the person they'll be testifying against is your other client in the same manner. So you have a conflict of interest. Even if you go to trial, there's no deal. They're not planning to testify against each other. There's a natural tendency, if they do testify, for people to shift the blame a little bit or to downplay their own role in the crime, which for a jury, they're likely to infer that that means that the other accomplice or other defendant is more blameworthy. And the problem is that person is also your client. So I hope you can see the potential, the minefield here for conflicts of interest when you undertake a joint representation. This can also arise in transactional matters outside of the litigation context. So let's say three individuals want to set up a partnership or a corporation, and they have told you they're going to split all the profits evenly, split ownership evenly, and they just want you to draft the documents. Well, the problem is that eventually over time, once the business, it probably will take two or three years, five years for the business to start really having profits come in. And by then they may disagree about how much each of them should get. So one or more may feel that they deserve a greater share of either the profits or the control. They want to have more weight in the decision-making due to their special contribution. So if I can give like three archetypes here for these scenarios, you have a situation where one of those three people wants to start a business. It's really not planning on doing much of the work. They are putting up the money for it. They're a passive investor, very, very common. And so they have money. They like to go around finding new businesses to bankroll. I hope you can see that it takes two or three years for the business to start having profits come in. The person who fronted the money out of their own pocket is going to feel like they should get paid back first. And the others might say, no, no, no. All profits get divided three ways. They're going to have a dispute or a conflict. Well, secondly, you may have one out of those three that is just a workaholic. They do more work. They work seven days a week, long days, really hustling to get new customers or new clients for their business and to launch the business and get it off the ground. Well, a few years into it, the person who objectively has done more work than the other two put together is going to feel like they should be getting paid more. And third, sometimes when you start a new company, there's one of them has the big idea or the vision or the famous name or something like that, that they're bringing to the table. And so even if they don't put up the money or they don't do all of the legwork for the business, they feel like nobody else would be there, but for them and their vision or their genius or their great idea. And so they may start demanding a greater share. This is so common and so foreseeable. I hope that you appreciate that it would have been better at the outset if each of them had their own lawyer who was looking out for and anticipating their interests and advocating for them and trying to avoid pitfalls in the future. And instead, you're a little bit compromised because they're all sharing the same lawyer and that's you. So let's go back and talk about a couple more scenarios. I have a hypothetical here. Suppose four musicians, we'll call them John, Paul, George, and Ringo, ask a lawyer to help them create their own record company. And it's going to be a partnership. They want to divide the profits and divide the ownership and control evenly. The problem is that when you get to know these four musicians, two of them are a lot more talented than the other two. So two of them are extraordinarily gifted, let's say hypothetically, extraordinarily gifted songwriters. So they just have a knack kind of outstanding in their generation for weaving together lyrics and catchy tunes in a way that gets stuck in people's heads and has a broad appeal to lots of different types of audiences and age groups and so forth. So that 50 years later, these songs are still being played on the radio and people are still singing along. That's a rare talent for songwriting. Now, when we talk about the other two, they're good, they're competent musicians, but the fact is the band would work even if they were swapped out. So Ringo in the lower left-hand corner was in fact the second drummer for the Beatles. And George, he would write a song, have about one song on each album. Some of them were hits, but the other two could have hits, several hits, songs on every album and wrote 95% of the songs. I hope you can see that years down the road, their legal interests will start to diverge about how much control they should have over their creative process and what songs go on the albums and how they should divide up the money and so forth. And it would have been better for each of them to have their own lawyer from the very beginning that would be looking out for their individual interests. Now, remember there's a second category. I'm just going to spend a moment on this because we'll have other lectures where I go into this in depth, but material limitations. One scenario would be, let's say the lawyer has personal financial investment in the opposing party's company, and that could influence the lawyer's objectivity or give them bias. So you have a client who says, I want to sue XYZ corporation. And the lawyer says, great, I'll represent you. But the lawyer has, uh, owns a lot of stock, like hundreds of thousands of dollars worth of stock in that corporation. So the lawyer doesn't really want to see that corporation forced into bankruptcy. So that could either create bias or the appearance of bias for that lawyer. It could also just be something personal. That's not financial. Like the client is a lawyer's ex-spouse or ex-boyfriend or girlfriend, or, um, uh, somebody that is an, an old nemesis or enemy or, uh, or something like that. Um, that they're really not the best person. Let's say things ended very badly. They were bitter. Somebody got a restraining order and so forth. Maybe find somebody else to represent that person besides this lawyer, because there could be bias or at least the appearance of bias. Now that's not going to apply to every ex-boyfriend or girlfriend. There could be people that are fine. They could set aside what's happened in the distant past and provide competent and diligent representation. But that's where we get into the question of whether there's a substantial risk of a material limitation. It could also be because the lawyer feels really passionately about some political cause or social cause. And the client is someone who represents the opposite of the other side of that, maybe sort of the enemy, um, so to speak. Well, maybe the lawyer can set aside his or her feelings about the issue for purposes of the representation if it's a simple matter. But if it's not a simple matter, if it's going to be really involved and require a lot of emotional energy, this lawyer might not be the best person to provide representation to that client. That concludes our introductory lecture about conflicts of interest. We'll have more where we really unpack some of the details that you need to watch out for on exams.