The Elements of Conflict Waivers

Volume 40 Number 2

By

About the Author

Marian C. Rice is the chair of the Attorney Liability Practice Group at the New York law firm of L’Abbate Balkan Colavita & Contini LLP, where she represents attorneys in professional liability matters and provides advice to attorneys on risk management and ethical issues. She is a member of the Standing Committee on Lawyer’s Professional Liability.

Law Practice Magazine | March/April 2014 | The ABA TECHSHOW 2014 IssueHAVING ADDRESSED in the two previous columns the administrative procedures that constitute an effective conflict-checking program and the process for analyzing the existence of a conflict, we turn to how to waive an identified conflict. Before doing so, it bears repeating that the consequences of an ineffective waiver or an attempt to waive a nonwaivable conflict can be devastating to a law firm and may establish grounds for a disqualification motion, disgorgement of fees, a malpractice claim or a grievance. None of these possibilities advances the development of a long-standing client relationship. Crafting a conflict waiver is not the time to push the edge of the envelope. Erring on the side of caution is ultimately the prudent course and in the best interests of both the clients and the law firm. Representations involving nonwaivable conflicts simply must be rejected.

OBTAINING INFORMED CONSENT

Once a waivable conflict has been identified, it may only be resolved if the attorney reasonably believes he or she can effectively represent the client or clients notwithstanding the existence of the conflict, and the affected clients give their informed consent. Common sense has long dictated that to be effective, a conflict waiver must be documented in writing. Now, most jurisdictions require that the conflict waiver either be signed by the client or confirmed in writing. The better practice is to secure the client’s signed acknowledgment to all conflict waivers, even where the informed consent need only be confirmed in writing.

Securing the client’s signature alone will not defeat a subsequent challenge to the waiver. To be effective, the law firm must be able to demonstrate that the informed consent of the client was obtained after the client was provided sufficient information regarding the risks and the reasonably available alternatives to the proposed waiver. Obtaining the informed consent of the client ordinarily includes a direct discussion between the attorney and the client, and will usually require an affirmative response by the client. Consent cannot be reliably inferred from the client’s failure to respond to a request for a waiver. While there is no obligation to inform a client of facts or conclusions already known to the client, if the attorney does not specifically inform the client of the pertinent circumstances, the risk always exists that the consent will be invalid.

The extent of the information that must be conveyed depends upon the sophistication of the client. As a result, the client’s general experience in legal matters and in making similar-type decisions impact the scope of the disclosure required. For example, while one should not assume that all in-house counsel are well versed in the potential consequences of a conflict, if a conflict waiver is being addressed with a client’s in-house counsel, a more broad discussion of the potential risks and benefits may be in order. On the other hand, disclosure to an unsophisticated client must provide sufficient information to give the client a clear understanding of the potential consequences of waiving the conflict. If there is a reluctance to convey certain details to the client because it may cause the client’s refusal to waive—that is exactly the type of information that should be communicated. When evaluated from the vantage point of hindsight—ordinarily after something has gone wrong and the client feels disadvantaged—the burden of showing that the client was provided all of the material information and potential alternatives is a high bar to meet.

WAIVER ISSUES NEEDING ATTENTION

Because the client must be advised of the risks and alternatives applicable to the contemplated engagements, no single conflict waiver form will suffice. Without waiving protected client confidential information, an effective waiver should be written in plain, easily understandable language and address the following matters:

  • The identification of the client or clients the attorney proposes to represent (or oppose), as well as those individuals or entities the attorney will not be representing.
  • The scope of the proposed representation—that is, the work to be performed, including any limitations on the engagement.
  • A clear explanation of the facts creating the conflict (without disclosing confidential client information).
  • A description of how the conflict will impact the representation of the affected clients, including whether the conflict may cause the attorney to be less zealous and any limitations on the representation related to the conflict.
  • The positive aspects of proceeding with the representation.
  • If the proposed engagement constitutes a waivable conflict under the Model Rules of Professional Conduct, don’t soften it by calling the circumstances a “potential” conflict. The adverse consequences of waiving the conflict may be “potential,” but if a conflict exists, it should be plainly stated.
  • In the event the conflict involves a joint representation of clients, an explanation that the information received from each client may not be withheld from the other.
  • If the conflict does not involve a joint representation of clients, provide an outline of how client confidential information will be preserved, including the extent of any screening the firm intends to put into place. Acceptable screening procedures include: the written agreement by the individually disqualified attorney that there will be no disclosures or communications with others; password protecting computer files; segregating and securing client files; and periodic, documented communications/email to office staff and attorneys indicating the matter should not be discussed in front of the individually disqualified attorney. Keep in mind that screening procedures that otherwise might be adequate may not be sufficient if the firm fails to implement the procedures in a timely manner and advise the affected client of the existence of the conflict and screening procedures undertaken. This is particularly true if confidential information is disclosed before the affected client is advised of the conflict.
  • In the event the clients’ interests diverge further or if one of the affected clients withdraws the waiver, the waiver should include a statement of the steps that will be followed. For instance, if the parties intend that counsel will proceed with the representation of one of the clients, this should be clearly spelled out, and the reason for this outcome should be plainly stated. If it is contemplated that circumstances may result in one of the affected client’s retention of new counsel, the potential issue of the increased cost of the new counsel’s duplication of effort should be noted.
  • The waiver should include a recommendation that the affected client who is being asked to waive the conflict carefully consider the issues raised in the waiver and seek the advice of independent counsel before agreeing to waive the conflict (and be given the time to obtain the advice). In some jurisdictions, the advice to seek independent counsel before a waiver is signed is mandatory. In the event that the client declines the opportunity to seek independent legal advice, the client’s affirmative acknowledgment should be obtained.

Even once the law firm has taken the necessary steps to obtain the client’s informed consent to a conflict waiver, the process does not stop. As the engagement proceeds, additional information may surface requiring counsel to readdress the conflict issue and provide further written disclosure to ensure that the client’s waiver remains truly informed.

Again, because the effective waiver is fact-specific, the foregoing suggestions are not exclusive. Every attorney seeking a conflict waiver needs to critically examine the circumstances to determine (1) what the client needs to know in order to provide his or her informed consent to the waiver and (2) whether, in fact, the attorney can provide sufficient disclosure to make the waiver meaningful to both the client and the law firm.

CONCLUSION

The undivided duty of loyalty is the touchstone upon which the client-attorney relationship rests. There are times when it makes sense for a law firm to seek the waiver of an existing conflict. But there is a fine line that runs between a rational waiver of conflict and a conflict in which no amount of disclosure can result in an informed waiver. Cross the line and the consequences to the client and the law firm can be dire. I hope this column provides the framework within which a meaningful waiver of a current conflict may be crafted.

Advertisement

BOOK SPOTLIGHT

   

New and notable books and resources for the business of practicing law.

   

The 2014 Solo and Small Firm Legal Technology GuideThe 2014 Solo and Small Firm Legal Technology Guide
By Sharon D. Nelson, John W. Simek and Michael C. Maschke, with an introduction by James A. Calloway
This annual guide is the only one of its kind written to help solo and small-firm lawyers find the best technology for their dollar. You’ll find the most current information and recommendations on computers, servers, networking equipment, legal software, printers, security products, smartphones, the iPad and anything else a law office might need. It’s written in clear, easily understandable language to make implementation easier if you choose to do it yourself, or you can use it in conjunction with your IT consultant. Either way, you’ll learn how to make technology work for you.

   

QuickBooks in One Hour for LawyersQuickBooks in One Hour for Lawyers
By Lynette Benton
Spend more time practicing law—and less time balancing the books—by investing in easy and effective accounting software. Lynette Benton, a QuickBooks-certified ProAdvisor and consultant who has helped hundreds of attorneys and small firms with financial management, will teach you how to use this popular accounting software in your law practice. QuickBooks in One Hour for Lawyers offers step-by-step guidance for getting started with QuickBooks and putting it to work tracking income, expenses, time, billing and much more.