Unwaivable Conflicts of Interest

UNWAIVABLE CONFLICTS OF INTEREST⁰¹

ISSUE 2, 2024

THE RULES OF PROFESSIONAL CONDUCT GENERALLY PERMIT CLIENTS TO CONSENT TO CONFLICTS OF INTEREST, BUT NOT EVERY CONFLICT CAN BE WAIVED.

Written by Kevin Mohr^*

Is there such a thing as an unwaivable conflict of interest in California? California’s current Rules of Professional Conduct ("Rules") became effective on November 1, 2018. Two fundamental principles guided the drafters of the Rules as they relate to conflicts of interest. First, the conflicts rules should not alter the law as it had been developed through case law over many decades. Second, the rules should generally permit a lawyer to represent clients with interests that potentially, or actually conflict, so long as the lawyer has adequately disclosed to the clients the risks and foreseeable adverse consequences of a conflicted representation, and following the disclosure, the clients have provided their written consent. In at least one respect, however, those maxims were in conflict: Although California’s Rules since their inception have explicitly permitted clients to consent to conflicted representations,⁰² the conflicts of interest case law consistently held that in certain situations a lawyer could not represent multiple clients even when the clients were willing to retain the same lawyer. As this brief article explains, the current Rules adhere to the drafters’ guiding principles by incorporating the case law on unwaivable conflicts of interest into the language of the Rules themselves.

There are two general categories of conflict of interest situations that are considered unwaivable. First, there are conflicts that cannot be waived because an informed consent cannot be obtained. This situation can arise either because: (i) the lawyer is unable, because of duties owed to a third person, to provide a disclosure sufficient to render the clients’ consent informed, or (ii) the client is incapable of consenting. A second category includes three conflict situations under which a client’s consent to a conflict would be deemed ineffective even if the lawyer can make adequate disclosure about the conflicted representation’s risks and consequences and the affected clients are willing to consent to that representation. Each category is explicitly recognized in the Rules and is discussed in turn.

CATEGORY I: INFORMED CONSENT CANNOT BE OBTAINED BECAUSE (1) CONFIDENTIALITY DUTIES PRECLUDE DISCLOSURE OR (2) CLIENT LACKS CAPACITY TO CONSENT

The first general category of unwaivable conflicts of interest focuses on the ability of the lawyer to obtain the informed consent of all affected clients to a conflicted representation. The California Rules generally permit a lawyer to represent multiple clients with conflicting interests so long as all the clients have provided their informed written consent. For example, if an employee and employer have been sued based on the act of the employee, the two can retain the same lawyer even if their interests potentially conflict so long as the lawyer has "communicated and explained" the "material risks" and "foreseeable adverse consequences" of the clients being jointly represented, and the clients both agree.⁰³ However, there are two situations where an informed consent cannot be obtained.

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1. DISCLOSURE PRECLUDED BY CONFIDENTIALITY DUTY OWED TO ANOTHER.

This kind of unwaivable conflict goes to the very foundation underlying an effective conflict consent—that a client who has received adequate disclosure concerning the conflict at issue can make an informed decision whether to permit the conflicted representation to go forward. Under Rule 1.0.1(e), "informed consent" means "a person’s agreement to a proposed course of conduct after the lawyer has communicated and explained (i) the relevant circumstances and (ii) the material risks, including any actual and reasonably foreseeable adverse consequences of the proposed course of conduct," which in the case of a conflict would be the conflicted representation. Thus, whether the client consent is "informed" will depend on the quality or adequacy of the disclosure. Put another way, a consent is informed only to the extent the disclosure is adequate. Further, what constitutes adequate disclosure will in turn depend on the specific facts and circumstances.

It should be apparent that if a lawyer is precluded from providing a client with an adequate disclosure because the lawyer is prohibited by the lawyer’s duty of confidentiality owed to another client, a former client, or a third person, the client will be unable to provide an informed consent. This concept is explicitly recognized in the Rules.⁰⁴

2. INABILITY OF CLIENT TO CONSENT.

This situation presents the opposite side of the coin from a lawyer’s ability to make an adequate disclosure. Even if a lawyer were able to fully "communicate[] and explain[]" the risks and consequences of the conflicted representation, "informed consent" under Rule 1.0.1(e) still requires that the client agree by providing their written consent. Although diminished capacity presents a broad spectrum of abilities, a client with significantly diminished capacity might be unable to comprehend a lawyer’s disclosure concerning the risks associated with a conflicted representation and consequently would be unable to give informed consent to the representation.⁰⁵

A lawyer may confront substantial difficulties in representing a client with diminished capacity. In a jurisdiction that has adopted ABA Model Rule 1.14, those difficulties are somewhat mitigated by a relaxation of confidentiality standards as permitted under Model Rule 1.14. In California, however, there is no rule counterpart to Model Rule 1.14, and so a lawyer’s ability to protect a diminished capacity client’s interests is constrained and is to a large extent dependent upon the lawyer’s ability to communicate effectively with the client to obtain the client’s informed consent to a proposed course of action. A recent State Bar ethics opinion has suggested how a lawyer might modify her usual communication tactics to enhance a client’s understanding of the alternatives available, thus permitting the lawyer to obtain the client’s informed consent.⁰⁶ If, however, the client remains unable to consent despite the lawyer’s best efforts to communicate the foreseeable consequences of a conflicted representation, the conflict would be unwaivable.

Category II: Although Lawyer Can Make an Adequate Disclosure and Client Is Willing to Agree, Conflicted Representation Is Precluded Because: (1) Competent Representation Cannot Be Provided to Both Clients; (2) Representation Is Prohibited by Law; or (3) Adverse Interests of Clients Are Advanced in the Same Matter Before a Tribunal.

The second general category of unwaivable conflicts involves conflict situations where a lawyer is prohibited from representing multiple clients even if the lawyer is able to provide adequate disclosure and the client is willing to consent. These three situations have been recognized in California case law or statutes for many years and have now been codified in the Rules, specifically in Rule 1.7(d).

1. LAWYER DOES NOT REASONABLY BELIEVE THAT THE LAWYER CAN COMPETENTLY REPRESENT ALL AFFECTED CLIENTS.

The duty to provide competent representation to each and every client of the lawyer cannot be waived. Rule 1.8.8(a) provides: "A lawyer shall not: (a) Contract with a client prospectively limiting the lawyer’s liability to the client for the lawyer’s professional malpractice." Rule 1.7(d)(1) provides that representation under Rule 1.7 (current client conflicts) is permitted only if the informed written consent of all affected clients is obtained "and (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client." (Emphasis added.) Paragraph (d) (1) requires both; (i) the informed written consent of each affected client, and (ii) that the lawyer "reasonably believe" the lawyer can provide each client with competent and diligent representation.

It is important to recognize that the rule requires an objective belief; not the lawyer’s subjective belief. "Reasonable belief" is a defined term in the rule and "when used in reference to a lawyer means that the lawyer believes the matter in question and that the circumstances are such that the belief is reasonable."⁰⁷ "Reasonable" itself is defined and "when used in relation to conduct by a lawyer means the conduct of a reasonably prudent and competent lawyer."⁰⁸ "Reasonably prudent" is a term we

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were all introduced to in first semester law school as the epitome of an objective standard. Finally, "belief" is also a defined term and means "that the person involved actually supposes the fact in question to be true. A person’s belief may be inferred from circumstances." In other words, a lawyer cannot simply argue that the lawyer truly or honestly believed the lawyer could provide competent representation to all the clients. The belief necessary to satisfy the rule is that of a reasonably prudent lawyer and must be based on the facts and circumstances of the representation. Courts in other jurisdictions have reached the same conclusion in interpreting their counterparts to Rule 1.7(d)(1).⁰⁹

The inclusion of Rule 1.7(d)(1) in the Rules did not change the law in California. California courts have long recognized that consent by itself is not sufficient where a conflicted representation would prevent a lawyer from competently representing all the clients who retained the lawyer in a matter. For example, Klemm v. Superior Court¹⁰ recognized this rule. Although the Klemm court held the lawyer, who represented a divorced couple who were both opposed to the government’s claim for child support, need not be disqualified because the client’s interests did not conflict, it stated:

As a matter of law a purported consent to dual representation of litigants with adverse interests at a contested hearing would be neither intelligent nor informed. Such representation would be per se inconsistent with the adversary position of an attorney in litigation, and common sense dictates that it would be unthinkable to permit an attorney to assume a position at a trial or hearing where he could not advocate the interests of one client without adversely injuring those of the other.¹¹

Although the court’s concern with the undivided loyalty owed each client is evident, the infirmity in representing adverse interests in such situations can be characterized as rendering the lawyer incapable of exercising independent judgment on behalf of both clients and providing competent representation to both, the advancement of one client’s position being to the disadvantage of the other.¹²

2. THE REPRESENTATION IS PROHIBITED BY LAW.

Rule 1.7(d)(2) of the California Rules of Professional Conduct provides that representation under Rule 1.7 is permitted only if the informed written consent of all affected clients is obtained "and … (2) the representation is not prohibited by law." This prohibition is straightforward; lawyers are sworn to uphold the law.¹³ For a lawyer to engage in a representation prohibited by law would be a continuing violation of the lawyer’s oath regardless of client consent. An example of such a representation is found in Business and Professions Code section 6131, which provides former prosecutors are prohibited from consulting with the defense in a matter in which they were personally involved as prosecutors.¹⁴

3. THE REPRESENTATION INVOLVES 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.

Rule 1.7(d)(3) provides that representation under rule 1.7 is permitted only if the informed written consent of all clients is obtained "and … (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 other proceeding before a tribunal." Notwithstanding the informed written consent of the clients, a lawyer is not permitted to continue a representation where "in the same litigation" or "other proceeding" before a "tribunal,"¹⁵ the lawyer represents a client that files a claim against another client that the lawyer represents in the same proceeding.

Although Rule 1.7(d)(3) might be viewed as simply a special circumstance of a lawyer not being able to provide competent representation to all clients as required by paragraph (d) (1), discussed above, the policy underlying the rule is the preservation of the integrity of the tribunal and, by extension, the judicial system. That concept was recognized in State Compensation Ins. Fund v. Drobot, 192 F. Supp. 3d 1080 (C.D. Cal. 2016), which stated: "[t]he paramount concern must be to preserve public trust in the scrupulous administration of justice and the integrity of the bar." Accordingly, "[t]he important right to counsel of one’s choice must yield to ethical considerations that affect the fundamental principles of our judicial process."¹⁶ Or, to put it in the words of the Klemm court, in an adversarial system whose integrity and effectiveness depends in large part on parties being represented by loyal advocates similarly knowledgeable and skilled, permitting the same lawyer to advance directly adverse positions in a contested matter before a tribunal would be "unthinkable."¹⁷

The foregoing discussion demonstrates that although the California Rules of Professional Conduct generally provide lawyers with the ability to obtain a client’s informed consent to waive a conflicted representation, there are situations when a lawyer is precluded from obtaining such a waiver. Lawyers will be well served to familiarize themselves with these situations.

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Notes:

^*. Professor Kevin Mohr (Western State College of Law, Irvine, California) is a founding member of the CLA’s Ethics Committee and served as Consultant to the State Bar’s Rules Revision Commission, which drafted the new Rules of Professional Conduct approved by the Supreme Court effective November 1, 2018. The views expressed are his own.

^01. A version of this article appeared in the Ethics Column of the Update of the Los Angeles County Bar in 2012. It was updated in consideration of the new Rules of Professional Conduct that became effective on November 1, 2018, and appeared in the May 2020 edition of the CLA’s E-news. This version is updated to include additional authority.

^02. Rule 7 of the 1928 California Rules of Professional Conduct provided: "A member of The State Bar shall not represent conflicting interests, except with the consent of all parties concerned." (emphasis added.)

^03. Cal. Rules of Prof’l Conduct r. 1.0.1(e). Most conflicts rules providing for a client’s consent to a conflicted representation require that the client’s consent be in writing, i.e., they require "informed written consent." See, e.g., id. at r. 1.7, 1.8.1, 1.8.6, 1.8.7, 1.9, 1.11 & 1.18. To obtain "informed written consent," both the disclosure required by California Rules of Professional Conduct rule 1.0.1(e) and the client’s consent must be in writing. Id. at r. 1.0.1(e-1).

^04. See id. at r. 1.7, cmt. [7].

^05. An analogous situation was presented in Forrest v. Baeza, 58 Cal. App. 4th 65 (1997). There, the court held in a shareholder derivative suit that a lawyer may not represent both a closely held corporation and the directors/shareholders accused of wrongdoing. It would not be possible for the lawyer to obtain informed consent to representing both interests. The court reasoned that "where the only shareholders of the corporations are also the directors involved in the controversy, to allow the shareholders to consent on behalf of the corporation would render [the rule] meaningless." Id. at 76.

^06. See Cal. State Bar, Formal Op. 2021-207, at 9-10, https://www.calbar.ca.gov/Portals/0/documents/publicComment/2021/COPRAC-Formal-Opinion-No.2021-207.pdf (last visited June 29, 2023).

^07. Cal. Rules of Prof’l Conduct r. 1.0.1(i).

^08. Id. at r. 1.0.1(h).

^09. See, e.g., Paladino v. Skate Safe, 958 N.Y.S.2d 62 (2010); Franson v. City of Honolulu, No. 16-00096 DKW-KSC, 2017 WL 372976 (D. Haw. Jan. 25, 2017); Johnson v. Clark Gin Serv., Inc., No. c/w 15-3320, 2016 WL 7017267 (E.D. La. Dec. 1, 2016); Malibu Media, LLC v. Doe, No. 16CV1916-GPC(JMA), 2016 WL 6216142 (M.D. Penn. Oct. 24, 2016); Mitsui O.S.K. Lines v. Continental Shipping Line, Inc., 2006 WL 8457532 (D. N.J. Sept. 20, 2006). All of these courts interpreted rule provisions identical to the language of California Rules of Professional Conduct rule 1.7(d).

^10. Klemm v. Super. Ct., 75 Cal. App. 3d 893 (1977).

^11. Id. at 899.

^12. See also Gilbert v. Nat’l Corp. for Housing Partnerships, 71 Cal. App. 4th 1240, 1254 (1999); In re Disciplinary Action Against Coleman, 793 N.W.2d 296, 306 (Minn. 2011) (Applying a rule identical to California Rules of Professional Conduct rule 1.7(b)(1), the court stated:

Because [the clients’] expected testimony was directly contradictory, Coleman was unable to fulfill his duties of representing both clients competently and with due diligence. See Rule 1.1 and 1.3. Specifically, Coleman was unable to represent both clients and exercise independent judgment in pursuing all potential defenses and settlement possibilities for both clients);

L.A. Cnty. Bar Ass’n Ethics Op. 471 (12/21/92), https://s3.amazonaws.com/membercentralcdn/sitedocuments/lacba/lacba/0837/2094837.pdf?AWSAccessKeyId=AKIAIHKD6NT2OL2HNPMQ&Expires=1688082252&Signature=xcBFCNY8aMisaMlizyd9GdRm2TQ%3D&response-content-disposition=inline%3B%20filename%3D%22ethics%5Fopinion%5F471%2Epdf%22%3B%20filename%2A%3DUTF%2D8%27%27ethics%255Fopinion%255F471%252Epdf&response-content-type=application%2Fpdf (last visited 6/29/2023).

^13. See Cal. Bus. & Prof. Code §§ 6067, 6068(a).

^14. See Cal. Rules of Prof’l Conduct r. 1.9, cmt. [1], r. 1.11, cmt. [10]. See also People v. Fayed, 9 Cal. 5th 147, 212-213 (2020) (court raises concerns with former prosecutor at the trial level having joined firm of defendant’s lawyers on appeal).

^15. "Tribunal" is a defined term in the Rules:

means: (i) a court, an arbitrator, an administrative law judge, or an administrative body acting in an adjudicative capacity and authorized to make a decision that can be binding on the parties involved; or (ii) a special master or other person* to whom a court refers one or more issues and whose decision or recommendation can be binding on the parties if approved by the court.

Because the rule limits tribunal to a body that can make decisions that are "binding" on the parties involved, it does not appear to include non-binding mediations.

^16. State Compensation Ins. Fund v. Drobot, 192 F. Supp. 3d 1080, 1087-88 (C.D. Cal. 2016) (quoting People ex rel. Dept. of Corps. v. SpeeDee Oil Change Systems, Inc., 20 Cal. 4th 1135, 1145 (1999).)

^17. Klemm v. Super. Ct., 75 Cal. App. 3d 893, 899 (1977); See also L.A. Cnty. Bar Ass’n Ethics Op. 531 (Sept. 23, 2020), at 8 (concluding that in an auto accident case where the driver was partially at fault, regardless of whether it would be objectively reasonably for a lawyer to competently represent both the driver and passenger, the lawyer would be precluded by rule 1.7(d)(3) from representing both if a claim is filed by the passenger against the driver.) This opinion is available at https://s3.amazonaws.com/membercentralcdn/sitedocuments/lacba/lacba/0420/2094420.pdf?AWSAccessKeyId=AKIAIHKD6NT2OL2HNPMQ&Expires=1721451498&Signature=Np0iP3J42eH3pMU25FDH47vs59I=&response-content-disposition=inline; filename="ethics-opinion-531.pdf";filename*=UTF-8"ethics%2Dopinion%2D531%2Epdf&response-content-type=application/pdf

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