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HOW TO BUILD YOUR PROFESSIONAL SKILLS
Ethical Considerations in Obtaining New Clients
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01-31-2008 | 11:15 AM
Ethical Considerations in Obtaining New Clients
Before accepting a client in a matter, the attorney must consider two major things. First and foremost is whether the attorney has a conflict of interest in representing the client, whether that conflict be real or potential. The second consideration is whether the attorney has the competence and time to represent the client.
Conflict of Interest
RULE 1.7 ABA Model Rules of Professional Conduct states that an attorney shall not represent a client if that representation will be directly adverse to another client or if “there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client
a former client or a third person or by a personal interest of the lawyer.”
In order to determine whether an attorney may represent a potential new client or an existing client in a new matter, the attorney must (1) identify the client; (2) determine whether a conflict exists; (3) decide if representation could be undertaken despite the conflict; and, (4) get consent from all clients involved in the conflict to permit representation.
Who is the Client?
Before an attorney begins representation of any client, it is important to determine the identity of the client. Situations exist in which multiple people, various organizations, or people and a corporation come to an attorney with a common problem. To the extent that the representation is limited to the common problem, the attorney may be able to represent the group and resolve the problem. For example, an attorney may represent residents who do not want their zoning changed, or a corporation and a licensee suing a third party for patent infringement, or a class of injured patients suing a drug company.
If three people appear at an office consultation seeking to form a partnership, the attorney should make clear that he cannot represent the partnership itself and all three people if there should be a falling out among them or if representing one should result in an action adverse to the others.
At times an attorney is hired by a third party to represent a client. This most often occurs in insurance defense cases, but it might also occur when a corporation and its directors are sued in a derivative action, when a parent pays for the representation of a child, or when a trustee pays for the beneficiary of the trust. In all of these situations, the attorney must identify exactly who the client is.
Determining if a Conflict Exists
After identifying who the client is, the attorney must determine whether representing the client poses a conflict of interest under the attorney’s state code of professional conduct. Sometimes it is easy to determine that a conflict does or does not exist. At other times, the determination requires the attorney to look a little deeper into the matter.
For example, if a potential client comes to an attorney’s office and wants to sue a current client on the same matter for which the attorney represents the current client, there is no question that a conflict exists. Likewise, if the partners in a general partnership have a falling out, the attorney cannot represent both partners, and at times may have a conflict in representing either because of confidential information the attorney received while the partnership was in existence.
If a potential client comes to the firm and explains the matter, but then decides not to hire the law firm, the attorney may have a conflict of interest if the potential client’s adversary seeks representation on the same matter. It does not matter that the firm received no compensation from the first potential client. What does matter is that the attorney received confidential information that could be used against the first potential client. If the initial conversation did not include confidential information, the attorney may accept representation. See
Med-Trans Corp., Inc. v. City of California City, 156 Cal. App. 4th 655 (Cal. Ct. App. 2007).
In determining whether there is a conflict of interest, the attorney must keep in mind the phrase, “materially limited by the lawyer's responsibilities to another.” An example of this is readily apparent in criminal cases where two or more people are accused of a criminal act and the two blame each other. The attorney cannot represent both. A less obvious example is where an attorney represents a developer of a condominium project who sues a subcontractor for faulty work. The attorney might not be able to also represent the condo association, which may later look to the developer for damages arising out of the same faulty work.
A large law firm represents many corporations and entities. It must be careful to determine whether the organization to be sued by a potential client is a wholly-owned subsidiary of an existing client. A firm with a bankruptcy department that deals with corporate bankruptcies as well as collections against corporate debtors needs to be particularly careful in assessing whether a conflict exists.
At times, although there is no actual conflict, there might be a potential for a conflict in the future or the appearance of a conflict. The commentary to Rule 1.7 states: “The critical questions are the likelihood that a difference in interests will eventuate and, if it does, whether it will materially interfere with the lawyer's independent professional judgment in considering alternatives or foreclose courses of action that reasonably should be pursued on behalf of the client.”
Can Representation be Undertaken?
Once the existence or potential for a conflict is determined, the attorney must then decide whether it would be appropriate for him to represent the potential client without harming the current client. For example, two people are charged with a crime, and both say that neither did it because they were elsewhere when it happened. Under such circumstances, the attorney could represent both. Another potential conflict occurs when an insurance company employs a law firm to represent an insured who is sued under an automobile liability policy, where the insurance company also insures the party who is claiming damages. Although there is a potential for a conflict, an actual conflict may not exist.
Consider, also, a situation in which a real estate firm representing a community organization to oppose a propose zoning change is approached by one of the organization’s members to assist the member in rezoning a parcel either within or just outside the area covered by the community organization bylaws. Here, there may be a present or potential conflict. If the organization had expressed opposition to the type of rezoning the member wants anywhere in or near the community, a conflict may exist. The organization might not oppose a high rise condominium on a major thoroughfare leading into the community, but it may oppose a Wal-Mart proposed for the same location.
Once an attorney determines the existence of a present or potential conflict of interest and then decides he could represent the potential client anyway, the attorney must explain the circumstances to both the current client and the potential client and get consent from both. See
In re Geeding, 270 Kan. 139 (Kan. 2000).
Even with consent, there may be times when the conflict is so obvious that the attorney cannot represent a potential client. There are times when institutional interests prevent full development of a potential client’s case. Further, there are situations when representation of multiple parties is prohibited by state law. Case law prevents some local governments from consenting to representation in the event of a conflict.
The rules affecting current clients also apply to former clients, particularly where the representation of that former client has been recent or involved the same matter being presented by a new potential client. The issue is whether confidential information received from one client could later be used against that client.
Conflict may arise after representation has been appropriately undertaken. For example, an attorney leaves one law firm to become a partner or associate of a second. The attorney intends to take his client with him. If a client poses a conflict with the current or former client of the second law firm, however, the attorney may be disqualified from continuing representation. See
Bd. of Managers v. Wabash Loftominium, L.L.C., 376 Ill. App. 3d 185 (Ill. App. Ct. 2007).
From time to time, a conflict may arise between the party paying the bill and the party being represented. In
In re THE RULES OF PROFESSIONAL CONDUCT, 2000 MT 110 (Mont. 2000), a law firm obtained a declaratory judgment against an insurance company. The insurer had paid the bills for the defense of various insureds. The insurer wanted an outside auditing firm to review the bills. The court agreed with the law firm that it had represented the insured and that the auditing firm could not review the bills without the consent of the insureds
An attorney needs to be very careful in entering into a monetary relationship with a client. Rule 1.8 of the Model Code prohibits an attorney from entering “into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client” unless:
(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;
(2) the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and
(3) the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer's role in the transaction, including whether the lawyer is representing the client in the transaction.
RULE 1.8 ABA MODEL RULES OF PROFESSIONAL CONDUCT (2002).
An attorney should be very cautious in starting a new business with a client. The comment to Rule 1.8 shows concern that a lawyer's legal skill and training and the confidential relationship between lawyer and client create a possibility of overreaching when the lawyer participates in a business transaction with a client. An attorney is barred from lending money to a client. There is a potential conflict when the attorney purchases property from a client, particularly where the client is a trust or an estate. There is a risk where the client later needs representation in respect to the business transaction with the attorney.
A conflict of interest exists when an attorney acquires literary rights concerning the attorney’s representation of a client. The issues necessary to properly represent the client may be different or in conflict with those that make a book or movie more saleable. The best interests of the client must come before the interests of the attorney.
While an attorney may be named as executor of a will or trustee of a trust, the attorney must be careful that such an appointment is not the result of undue influence and will not materially limit the attorney’s independent professional judgment in any matter involving the estate or trust.
Although contingency fees are valid, they are not looked at fondly by the courts. Attorneys are barred from obtaining a proprietary interest in litigation other than contingency fees. This bar does not preclude an attorney from obtaining an attorney’s lien in order to recover his fee.
One clear rule is that an attorney may not begin a sexual relationship with a client. This does not preclude an attorney from providing representation with a person with whom he or she has a sexual relationship. A male attorney who drafts a will for his girlfriend, leaving everything to her children and naming the children as executors, will not have a conflict because he has no interest in the will or in the girlfriend’s estate. A conflict will arise when the will leaves a substantial gift to the attorney or names him as executor.
Rule 1.1 of the ABA Model Rules of Professional Conduct (2002), provides as follows:
A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.
Likewise, DR 6-101 (Failing to Act Competently), provides as follows:
(A) A lawyer shall not:
(1) Handle a legal matter which he knows or should know that he is not competent to handle, without associating with him a lawyer who is competent to handle it.
(2) Handle a legal matter without preparation adequate in the circumstances.
(3) Neglect a legal matter entrusted to him.
Attorneys are not in the Catch-22 position that they cannot represent a client without experience, but cannot get experience without representing a client. Before accepting representation of a client, however, the matter should be one in which the attorney is interested and is willing to put in the effort and energy to learn everything he or she can about the matter and to properly prepare for whatever actions are necessary to advance the client’s interests.
Except in those instances where specific expertise is required, such as patent law, an attorney may consult with other attorneys to learn about the ins and outs of a case. Such consultation is helpful in learning how judges in the circuit or district view similar cases, whether juries tend to be liberal or conservative in evaluating a case, and what procedures are used in identifying and presenting evidence. More important, consultation is extremely helpful in guiding an attorney in evaluating the value of a case. This valuation of a case is necessary in deciding if a case can be settled, and if so, on what terms, or whether the attorney should litigate.
Competency requires an attorney to completely research all the issues that will arise in representing a client. Research involves not only finding relevant statutes and case law, but also obtaining discovery, finding expert witnesses, and investigating fact witnesses. The attorney should review verdict reports for similar cases. Such reports frequently provide information on the issues in the case, the judge, the experts, and the amount, if any, awarded by the jury.
The attorney will be responsible for filing motions, preparing voir dire and jury instructions, preparing answers to interrogatories, and conducting or attending depositions. Before accepting representation, the attorney should assure himself that he has sufficient time and resources to complete everything necessary to properly present a client’s case. See
In re Conduct of Bettis, 342 Ore. 232 (Or. 2006).
In re Watson, 280 Kan. 375 (Kan. 2005), an attorney was suspended for one year for, among other things, failing to review material given to him by his client and failing to prepare and file a motion to change custody. See also In re Miller, 279 Kan. 912 (Kan. 2005), where an attorney was censured for failing to expedite the handling of a testator’s estate.
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