i1saa managing and avoiding conflicts of interest · 3/19/2020 · identify the nature of the...

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Managing and Avoiding Conflicts of Interest

Serving Illinois Lawyers

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Managing and Avoiding Conflicts of Interest

Managing and Avoiding Conflicts of InterestJeremy N. BoederJeremy N. Boeder

Jeremy N. Boeder, Tribler Orpett & Meyer P.C.Jeremy Boeder is a director with the Chicago law firm of Tribler Orpett & Meyer, PC, where he concentrates his practice on the representation of attorneys and other professionals in complex litigation, risk-management, and insurance coverage matters. As a litigator, Jeremy has achieved favorable results for his clients through mediation and arbitration, as lead counsel in numerous jury trials and as appellate counsel. Jeremy prides himself not only on his litigation success, but on aiding professionals, corporate clients and members of the insurance industry in avoiding litigation through risk assessment and the careful development of risk-management and risk-avoidance tools.

As panel counsel for ISBA Mutual, Jeremy and his firm frequently represent ISBA Mutual insureds in the defense of legal malpractice claims. ISBA Mutual’s Risk Management Consultation Service also provides Jeremy with a unique avenue to assist ISBA Mutual insureds in preventing legal malpractice claims before they occur. Through these risk management consultations, Jeremy applies his malpractice-defense and risk-management experience to aid lawyers in navigating novel and nuanced legal and ethical issues and in reducing risk and adding efficiency to their law practices.

Jeremy is a frequent speaker and author on topics relating to professional liability, risk management and legal ethics and has been frequently honored for his legal work, having been named by Super Lawyers Magazine as a Rising Star in Illinois in the area of professional liability defense by Super Lawyers Magazine, by Law Bulletin Publishing Company as an Illinois "Emerging Lawyer" and a "Leading Lawyer" in the areas of commercial litigation, professional malpractice defense and personal injury defense, and by the American Society of Legal Advocates in 2017 as one of the top 40 litigation lawyers under the age of 40 in the State of Illinois.

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Identifying and Managing Conflicts

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Establishing a Conflict of Interest System

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Methods of Checking Conflicts►Network/cloud-based

►Paper/Rolodex

►Memory

►Combination

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Capturing the Proper Information►Information on past and present clients

►Information on members of the firm

►Information on persons/entities whom the firm hasdeclined to represent

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Data Input Procedures►Use a consistent format

►Designate individual responsible for conflict-check

►Cross-train staff to conduct conflict-check

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When to Check for Conflicts►The initial meeting/telephone conference with a

potential client

►Opening a new client file

►Entry of a new party

►When hiring new lawyers, paralegals, “of counsel”

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After Conflict-Check is Completed► If no conflict uncovered, complete Conflict Search Form

► If potential conflict is found: Confirm conflict and identify nature of conflict under RPC Determine whether conflict is waivable

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Conflict Waivers

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Conflict Waiver Steps

1. Identify the nature of the conflict

2. Determine whether the conflict is waivable(RPC 1.7(b))

3. Use an appropriate conflict-waiver form to obtaininformed consent

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Rule 1.7 Conflict of Interest: Current Clients(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrentconflict 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’sresponsibilities 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 toeach 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 thelawyer in the same litigation or other proceeding before a tribunal; and

(4) each affected client gives informed consent.

Adopted July 1, 2009, effective January 1, 2010.

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Source: http://www.illinoiscourts.gov/supremecourt/rules/art_viii/ArtVIII_NEW.htm#1.7

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Obtaining Informed Consent

Rule 1.0(e)

“Informed consent” denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.

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What NOT to DoConflict Waiver

I [client name] hereby consent to be represented by Attorney in connection with my claims against Person 2. Attorney has disclosed that she represents Person 2 in an unrelated matter. I acknowledge that a conflict of interest would exist were Attorney to represent me while also representing Person 2 in the unrelated matter. I hereby give my informed consent to Attorney’s representation of me despite the aforementioned conflict of interest.

_________________________

[Client name] Date

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Common Conflict Scenarios

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Dealing with the “Unrepresented Party”Example 1: The simple house closing

Lawyer represents seller in the sale of their home. Buyer is unrepresented by counsel. At the closing, buyer asks lawyer about the documents buyer is signing. Lawyer feels there is no harm in briefly summarizing the contents of the documents for buyer. The deal closes.

Buyer subsequently decides that the property is worth far less than the purchase price. Rather than blame himself for a poor business decision, he sues the lawyer on several grounds.

► First, buyer alleges that the lawyer had a fiduciary duty to advise him to seek his ownindependent counsel.

► Second, buyer alleges that lawyer was in fact his counsel by virtue of the comments lawyermade to buyer at the closing.

► Finally, the buyer alleges that lawyer and seller conspired to defraud the buyer.

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Rule 4.3 Dealing with Unrepresented PersonIn dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer’s role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding. The lawyer shall not give legal advice to an unrepresented person, other than the advice to secure counsel, if the lawyer knows or reasonably should know that the interests of such a person are or have a reasonable possibility of being in conflict with the interests of the client.


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Dealing with the “Unrepresented Party”Reducing your risk

► Promptly send a letter to the unrepresented party identifying whoyou represent and stating that you do not represent theunrepresented individual, that the interests of your client are ormay be adverse to that individual, and that they should seeklegal counsel.

► Second, take caution in communicating with the unrepresentedindividual.

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Dealing with the “Unrepresented Party”Example 2: The small company deal

Lawyer has represented Mrs. Smith, president of a family business, for years. Mrs. Smith, the majority shareholder, hires Lawyer to sell a portion of her stock to her son, who also is employed by the family business. Lawyer proceeds to draft the stock purchase agreement with the interests of the client, Mrs. Smith, in mind. Her son is unrepresented by counsel throughout the transaction. During several meetings to finalize the terms of the agreement, the lawyer answers several questions posed by the son. After the deal is consummated, the son sues the lawyer for an alleged conflict of interest in representing both parties to the transaction.

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Representing Multiple ClientsExample 1: Representing multiple family members

Lawyer represents husband in seeking a divorce from his wife. Lawyer has not yet filed a petition for dissolution of marriage and believes that the wife may not be aware that husband will be filing for divorce. Husband and wife are considering selling their home and, together, have asked Lawyer to represent them in the sale.

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Rule 1.6(a) Confidentiality of Information(a) A lawyer shall not reveal information relating to the representationof a client unless the client gives informed consent, the disclosure isimpliedly authorized in order to carry out the representation, or thedisclosure is permitted by paragraph (b) or required by paragraph (c).

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Representing Multiple Family MembersReducing your risk

► Clearly identify your client, for yourself and for your client.► Remember to conduct a conflict check for each new

engagement, even if it involves one or more of the same clients.► Consider whether the conflict can be waived. If so, use an

effective conflict waiver. Remember that conflicts can only bewaived if “informed consent” is obtained.

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Representing Multiple ClientsExample 2: Representing business partners

Lawyer represents Founder in connection with the formation of a business entity. Lawyer then represents Founder in negotiations with a potential business partner, Partner. With Lawyer’s help, Founder agrees to terms with Partner, who is unrepresented by counsel. Founder and Partner become co-owners of the business entity.

Founder later asks Lawyer to represent the co-owned business entity.

Years later, Founder and Partner have a disagreement about the sharing of business profits. Founder asks Lawyer to represent him in his dispute with Partner.

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Representing Multiple ClientsExample 3: Representing driver and passenger in auto accident injury case

Husband was driving an automobile in which Wife was a passenger. They are involved in an accident when another vehicle collides with them while Husband is turning left on a green light. Husband and Wife are both seriously injured. Both Husband and Wife ask Lawyer to represent them in a lawsuit against the driver of the other vehicle.

Lawyer agrees to represent both Husband and Wife. The defendant offers $500,000 to settle both claims.

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Representing Multiple ClientsExample 4: Representing multiple clients seeking recovery from “Common Pool”

Lawyer represents Client A in a injury claim against local Tavern. The claim stems from allegations that Tavern bouncer struck Client A in the head, causing a traumatic brain injury. Tavern has $1 million liability policy.

Client B later asks Lawyer to represent her in injury claim against Tavern. A week before Client A was injured, Client B had slipped and fallen near the restroom at the Tavern. Client B’s injuries include broken teeth, a facial laceration and scarring, and a sprained wrist.

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Rule 1.8 Conflict of Interest: Current Clients: Specific Rules(g) A lawyer who represents two or more clients shall not participate in making anaggregate settlement of the claims of or against the clients, or in a criminal casean aggregated agreement as to guilty or nolo contendere pleas, unless each clientgives informed consent, in a writing signed by the client. The lawyer’s disclosureshall include the existence and nature of all the claims or pleas involved and ofthe participation of each person in the settlement.


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Confidential Information from Prospective ClientExample:

Wife meets with Lawyer regarding potential engagement to represent Wife in divorce from Husband. During the meeting, Wife discloses to Lawyer that she has learned that Husband is having an affair. Wife also discloses that she wants sole custody of children in the divorce. Lawyer offers Wife general information about her rights in relation to the potential divorce and child-custody issues. No decision is made at the meeting as to whether Wife and Lawyer will enter into an attorney-client relationship.

Husband subsequently approaches Lawyer with the purpose of hiring Lawyer in connection with petition for dissolution of marriage filed by Wife through other counsel.

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Rule 1.6(a) Confidentiality of Information

(a) A lawyer shall not reveal information relating to therepresentation of a client unless the client gives informedconsent, the disclosure is impliedly authorized in order tocarry out the representation, or the disclosure is permitted byparagraph (b) or required by paragraph (c).


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Rule 1.18 Duties to Prospective Client(a) A person who consults with a lawyer about the possibility of forming a client-lawyer relationship with respect to a matteris a prospective client.

(b) Even when no client-lawyer relationship ensues, a lawyer who has learned information from a prospective client shallnot use or reveal that information, except as Rule 1.9 would permit with respect to information of a former client.

(c) A lawyer subject to paragraph (b) shall not represent a client with interests materially adverse to those of a prospectiveclient in the same or a substantially related matter if the lawyer received information from the prospective client that couldbe significantly harmful to that person in the matter, except as provided in paragraph (d). If a lawyer is disqualified fromrepresentation under this paragraph, no lawyer in a firm with which that lawyer is associated may knowingly undertake orcontinue representation in such a matter, except as provided in paragraph (d).

(d) When the lawyer has received disqualifying information as defined in paragraph (c), representation is permissible if:

(1) both the affected client and the prospective client have given informed consent, or

(2) the lawyer who received the information took reasonable measures to avoid exposure to more disqualifyinginformation than was reasonably necessary to determine whether to represent the prospective client; and that lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom.


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Multiple representations that can create conflicts for lawyers► buyers and sellers (in a real estate deal)

► husband and wife in estate planning matters

► multiple beneficiaries

► guardian and ward

► majority and minority stockholders

► a corporation and its directors or officers

► the partners in a newly formed partnership

► a general partner and the limited partners

► multiple criminal or civil defendants

► multiple civil plaintiffs

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Personal Interest ConflictsExample:

Client is a marketing company. Lawyer represents Client in negotiating a long-term contract to provide advertising and other marketing services to a multi-national Footwear Manufacturer. Lawyer owns a small amount of stock in Footwear Manufacturer.

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Rule 1.7 Conflict of Interest: Current Clients(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves aconcurrent 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 thelawyer’s responsibilities to another client, a former client or a third person or by a personal interest ofthe lawyer.

(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer mayrepresent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligentrepresentation 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 clientrepresented by the lawyer in the same litigation or other proceeding before a tribunal; and

(4) each affected client gives informed consent.

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Adversary’s Claim Against LawyerExample 1:

Lawyer represents Client in litigation to collect a debt from a third party. After suit is filed, the litigation opponent threatens to sue Lawyer for violation of the FDCPA.

Example 2:

Lawyer represents Client in litigation. During the Litigation, the litigation opponent files a motion for sanctions against Lawyer and Client, alleging that Client’s claims were brought in bad faith and that Client failed to disclose certain items in discovery.

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Payment of Fee by Non-Client Third Party Example:

Lawyer has represented Father, a large-scale plumbing contractor, in business litigation over the years. Son, who previously worked for Father’s business and has recently opened his own small-scale plumbing business, has been sued for shoddy work by a developer that frequently hires Father’s business for its plumbing work. Son, who has never been involved in litigation, informs Father of the lawsuit and asks for his help. Father offers to retain Lawyer to represent Son in the litigation. Father approaches Lawyer and offers to pay Lawyer’s fees for Lawyer to represent Son in the matter.

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Rule 1.8(f) Conflict of Interest: Current Clients: Specific Rules(f) A lawyer shall not accept compensation for representing a clientfrom one other than the client unless:

(1) the client gives informed consent;(2) there is no interference with the lawyer’s independence ofprofessional judgment or with the client-lawyer relationship; and(3) information relating to representation of a client is protected asrequired by Rule 1.6.

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Conflicts of Interest to Avoid at All Costs► Concurrently representing opposing but ostensibly “friendly”

parties, such as a buyer and seller, lender and borrower, or adivorcing husband and wife

► Acting as both counsel and an officer or director of acorporate client

► Having a financial interest (other than fees) in a client matter

► Purchasing real estate from or selling real estate to a client

► Holding the position of beneficiary under a client’s will

► Engaging in business transactions with a current client

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Conflicts of Interest Do’s and Don’ts► Establish a Conflict of Interest system.

► Send a letter to the unrepresented partystating that you do not represent theindividual, that the interests of your clientare or may be adverse to that individual, andthat the unrepresented individual may wishto seek his or her own legal counsel.

► Determine whether a conflict can be waived.

► Call the ISBA Mutual Risk Managementhotline at (866) 473-4722 if you are in doubt.

► Don’t take any matter without conducting nappropriate conflicts check.

► Don’t make any lateral hires withoutconducting a conflicts check.

► Don’t overlook Of Counsel, IndependentContractors and Temporary Lawyers in yourConflict Checks.

► Don’t proceed with conflicted representationwithout reviewing the Illinois Rules ofProfessional Conduct to determine whetherit is consentable and/or waivable.

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The RulesRule 1.4………. Communication

Rule 1.6………. Confidentiality of Information

Rule 1.7………. Conflict of Interest: Current Clients

Rule 1.8………. Conflict of Interest: Current Clients: Specific Rules

Rule 1.9………. Duties to Former Clients

Rule 1.10………Imputation of Conflicts of Interest: General Rule

Rule 1.11……....Special Conflicts of Interest for Former and Current Government Officers and Employees

Rule 1.12………Former Judge, Arbitrator, Mediator or Other Third-Party Neutral

Rule 1.13………Organization as Client

Rule 1.18………Duties to Prospective Clients

Rule 4.3 ……….Dealing with Unrepresented Person

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Thank YouWhen in doubt, call for an ISBA Mutual Risk Management Consultationat (866) 473-4722

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22 www.isbamutual.com

Disclaimer This booklet includes loss prevention techniques designed to reduce the likelihood of being sued for legal malpractice. It is not the intent of these materials to suggest or establish practice standards or standards of care applicable to a lawyer’s performance in any given situation. Rather, the sole purpose of these materials is to help lawyers insured by ISBA Mutual avoid legal malpractice claims, including meritless and frivolous claims. To that end, the intention is to advise lawyers insured by ISBA Mutual to conduct their practice in a manner that is well above the accepted norm and standards of care established by substantive legal malpractice law. The recommendations contained in these materials are not necessarily appropriate for every lawyer or law firm and do not represent a complete analysis of each topic.

© 2020 Illinois State Bar Association Mutual Insurance Company

ISBAMUTUAL.COM (312) 379-2000

i1saa managing and avoiding conflicts of interest · 3/19/2020 · identify the nature of the...

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