What is a Conflict?
ConflictsThe following is a brief, limited review of the law of conflicts of interest in Texas. Should you have a question about a particular situation, please review applicable rules and case law. All rules cited below are the Texas Rules of Professional Conduct.
Conflicts between current clients (simultaneous representation).
An attorney may not represent two or more clients simultaneously if the matters are “substantially related” and the clients’ interests are “materially and directly adverse.” Rule 1.06(b)(1). Representing opposing parties in litigation is strictly forbidden. Rule 1.06(a). Disclosure and consent to these conflicts will not change the prohibition, even if a suit between parties is “friendly.”
A lawyer may not represent two or more clients simultaneously if representation of a client “reasonably appears to be or becomes adversely limited” by the lawyer’s responsibility to the other clients. Rule 1.06(b)(2); see Rule 1.07(a)(2 and 3). If the lawyer reasonably believes that the representation of each client will not be materially affected, the clients can consent to the multiple representation after “full disclosure of the existence, nature, implications and possible adverse consequences of common representation and the advantages, if any.” Rule 1.06(c); see Rule 1.07(a)(1). A lawyer who has engaged in multiple representation cannot later represent any of the parties in a later dispute arising out of the matter without the consent of all of the parties. Rule 1.06(d), 1.07(c).
Disclosure and consent often fails to insulate an attorney from malpractice claims. A dispute often arises about whether the lawyer reasonably believed that the representation of each client would not be materially affected by the conflict. The sufficiency and clarity of disclosure is often questioned. Almost no lawyer can anticipate every scenario, and juries often side with clients on the issue of sufficiency.
Some commentators have suggested that the rule permitting representation of one client in a later dispute permits obtaining such consent at the outset of the multiple representation. Whether this interpretation is accurate or not, if the clients’ interests were materially and directly adverse at the outset, the consent does not cure the conflict.
Conflicts between current clients and former clients (successive representation).
Representation of a client in a matter materially adverse to a former client is prohibited if the attorney’s previous work is in question, if confidential information of the former client could be revealed or used in the representation, or if the matter is the same or substantially related. Rule 1.09(a). Consent of the former client waives this type of conflict. Rule 1.09(a). As a practical matter, however, the former client may claim that the attorney advised them as to the prudence of entering into such consent, creating a current conflict of interest or allegation of malpractice not subject to the former client rule. Successive government and private employment is subject to special conflict rules. Rule 1.10.
Conflicts between the interests of the attorney and a client.
An attorney may not represent a client if the clients’ interests are “materially and directly adverse” to the interests of the attorney or his firm. Rule 1.06(a)(1). Disclosure and consent to this type of conflict does not remove the prohibition.
A lawyer may not represent two or more clients simultaneously if representation of a client “reasonably appears to be or becomes adversely limited” by the lawyer’s or law firm’s own interests. Rule 1.06(a)(2). Disclosure and consent can theoretically cure this type of conflict, Rule 1.06(c), but juries often find decide adversity and sufficiency issues in favor of the client.
A number of specific rules prohibit certain types of transactions between an attorney and a client. Business transactions with clients are prohibited unless several specific conditions are met. Rule 1.08(a). A lawyer cannot prepare an instrument which gives the lawyer or a close relative a gift, unless the lawyer is preparing the instrument for their own relative. Rule 1.08(b) Media rights of a client, financial assistance to a client, payment for services from third parties such as insurers, aggregate settlements, aggregate pleas, prospective limitations on liability, and acquisition of proprietary interests in litigation are all subject to special conflict rules. Rules 1.08(c-h).
Imputed conflicts.
The imputed conflict rule is quite harsh in Texas. In general, “if a lawyer would be prohibited” by one of these rules “from engaging in particular conduct, no other lawyer while a member of the firm may engage in that conduct.” Rules 1.06(f), 1.07(e), 1.08(i). Court decisions in Texas have not provided any exception for the creation of “Chinese Walls” shielding new attorneys from receipt of confidential information, though such Chinese Walls have been approved when non-attorney firm personnel are involved.
The former client rule modifies the general imputed conflict rule slightly, but the impact is similar. No attorney may represent a client if any other lawyer in the firm is prohibited from doing so by the former client rule. Rule 1.09(b). If an attorney prohibited from representing a client under the former client rule leaves a firm, other attorneys in the firm who did not personally represent the former client may represent a client against the former client only if the prior attorney’s work is not in question and a breach of confidences is unlikely. Rule 1.09(c). If the attorneys at the prior firm have discussed, viewed or retained confidential information in files about the former client, a breach of confidentiality might occur. Rule 1.09, Comment 6. Courts have mandated disqualification in former client situations despite apparent permission granted by the former client conflict disciplinary rule. Malpractice claims are common when firms decide former client conflicts in favor of adverse representation.
