Ethics Spotlight: Referral of a Conflicted Client

August 2021

By Scott Garner

How often do we receive a call from a prospective client, only to learn that we cannot accept the representation because we have a conflict of interest? In some cases, the prospective representation may be for a longstanding client, but a conflict of interest involving another client nonetheless may preclude us from taking on the new matter. In that circumstance, our instinct is to want to do something for the client or prospective client. And that something often is referring it to another competent lawyer. But might the mere act of referring the matter constitute a breach of the lawyer’s ethical duties? 

Current Client Conflict

The primary concern when a potential client asks you to accept a representation adverse to a current client is the duty of loyalty, which a lawyer owes to each of his current clients. See Flatt v. Superior Court, 9 Cal. 4th 275, 282 (1994). The duty of loyalty precludes a lawyer from taking on a representation that is adverse to a current client, absent informed written consent. Id.; see also Rule of Prof. Conduct 1.7(a). But is providing a lawyer referral for a party adverse to a current client considered an action adverse to that current client? 

Actions that may be considered adverse to a current client may be broader than one might expect. In its Formal Opinion No. 2011-182, the California State Bar opined that “‘adverse’ requires that the attorney has placed himself in a position of potential injury to the client.” There, the State Bar concluded that serving a discovery subpoena on a current client is an adverse act that is contrary to the lawyer’s duty of loyalty. The Opinion found the lawyer would be “coercing” the client and thereby injuring it. Moreover, the lawyer would be in the awkward and untenable position of having to decide, for example, how aggressively to pursue the discovery, risking the temptation to pull some punches.

But referring a conflicted client to another lawyer is not an overt act of coercion against the current client. In addition, once the referral is made, the lawyer no longer has any role, and thus there is no risk of “pulling punches” as there might be with a subpoena. But what guidance do the ethical rules provide?

Although no California court or ethics opinion has directly addressed this issue, bar associations in both New York and Washington, D.C., have – both concluding that a lawyer does not breach an ethical duty by referring a conflicted client to another counsel. See New York State Bar Ethics Opinion 1018 (2014); D.C. Bar Opinion 326 (2004); but see New York State Bar Ethics Opinion 338 (1974) (lawyer may not accept referral fee for referral of conflict matter, as “the referring lawyer cannot in any way profit from legal work which he would be disqualified from accepting.”). As expressed by the D.C. Bar, “We do not believe that the further step of recommending a specific lawyer or list of lawyers prejudices the referring lawyer’s existing client.” D.C. Bar Opinion 326. The D.C. Bar’s reasoning included rejecting the assumption that the prospective client would not have been able to find competent counsel in the absence of the referral. It further noted that the current client might actually be able to reach a better and more efficient resolution with the adverse party if that adverse party is represented by competent counsel. Finally, the D.C. Bar gave a nod to public policy, stating, “Inherent in our adversary system is the principle that persons ought to be represented by competent lawyers and that disputes ought to be resolved on the merits. Assisting a person to obtain competent representation is entirely consistent with that principle.”

Former Client Conflict

Suppose, on the other hand, the prospective client calls you to file a lawsuit against a former client rather than a current client. Suing a former client generally is not precluded by the Rules of Professional Conduct unless the subject matter of the potential new lawsuit is substantially related to the subject matter of the former representation. See Rule 1.9. If, however, you determine the matters are substantially related such that you cannot take on the new representation absent informed written consent from the former client, can you refer the prospective client to another counsel? 

As with the situation described above with a current client, there is no California authority directly addressing this issue. But the same logic applies, and, if anything, this should be an easier call. 

When analyzing duties owed to former clients, the primary duty is the duty of confidentiality, not the duty of loyalty. For that reason, where a lawyer is likely to have obtained confidential information from a former client that would be material to the new, adverse representation, the lawyer will be precluded from taking on the new matter adverse to the former client (absent informed written consent from the former client). See H.F. Ahmanson & Co. v. Salomon Bros., Inc., 229 Cal. App. 3d 1445, 1452 (1991). That rule is, in part, a prophylactic one. It ensures that the lawyer does not at some point in the future access the confidential information of the former client and use it against that former client. But in the referral context, there is no risk of this. Once the referral is made, the lawyer need have no further communications about the matter and should have no opportunity to impart confidential information to the new lawyer. Moreover, because the referral presumably would be made to a lawyer outside the referring lawyer’s firm or practice, knowledge the referring lawyer may have about the former client will not be imputed to the new lawyer. Accordingly, there would appear to be no reason to preclude a referral in these circumstances.

Finally, even if a lawyer concludes there is no ethical bar to referring a conflicted matter to another lawyer, there still may be good reasons to avoid it. Surely, the lawyer has no obligation to provide to a prospective client the names of other competent counsel. And, in some cases, the lawyer must consider whether a current or even former client might be upset if it learned the lawyer is the very person who introduced the client’s adversary to its lawyer. In other words, there may be business or other practical reasons not to make a referral, even if it is otherwise ethically permissible.

Scott Garner is a partner with Umberg/Zipser LLP in Irvine, California, where his practice focuses on complex business litigation, with a particular emphasis on the representation of lawyers and law firms. Garner is a member of the California Lawyers Association Ethics Committee, co-chair of the Orange County Bar Association’s Professionalism and Ethics Committee, a former chair of the State Bar of California’s Committee on Professional Responsibility and Conduct, and the immediate past president of the Orange County Bar Association. The views expressed herein are his own. He can be reached at sgarner@umbergzipser.com.