Conflicts of Interest

A lawyer’s fiduciary duty and duty of loyalty to his or her clients bars the lawyer from acting where there is a conflict of interest. This rule and its exceptions are found in section 3.4 of the Code of Professional Conduct. Where an exception to the general rule applies, special attention should always be paid to the requirements to fully disclose the conflict and obtain consent.

Where a lawyer intends to act for more than one client in the same matter or transaction under a joint retainer, section 3.4-5 provides that the lawyer must disclose to both or all of the clients

• that the lawyer has been asked to act for more than one of the parties,
• none of the information received in the matter can be kept confidential from the lawyer’s other clients involved in the matter, and
• if a conflict arises that cannot be resolved, the lawyer may need to withdraw as the lawyer for one or more of the clients or may have to withdraw completely.

If one of the clients is under a continuing retainer, the lawyer must disclose that fact to the other clients (see section 3.4-6).

In addition to the disclosure requirement, a lawyer must obtain the consent of each of the clients under sections 3.4-2 and 3.4-6 of the Code of Professional Conduct. Each client’s consent must be obtained before acting in a conflict and must be documented in writing. Consent can be documented either by the client signaling his or her consent in writing or the lawyer recording consent in a separate letter to each client (see section 3.4-7 commentary [1]).

Although lawyers are permitted under certain circumstances to act when in a conflict of interest,

• they are strongly urged to avoid acting for more than one client where it is likely a contentious issue will arise or the clients’ interests, rights or obligations will diverge (section 3.4-3), and
• must not act for opposing parties in a dispute (section 3.4-3).

In Estate files, lawyers must be cautious when acting for the executor of the estate if that executor is also a beneficiary. The executor is the lawyer’s client but there is a duty of care owed to the beneficiaries as a whole that may conflict with the executor’s personal interest as a beneficiary. Conflicts may also arise when a lawyer acts as both the executor and the solicitor of an estate.

Links:

Duty to Avoid Conflicts: section 3.4-1 (Code of Professional Conduct)

Consent: section 3.4-2 (Code of Professional Conduct)

Dispute: section 3.4-3 (Code of Professional Conduct)

Concurrent Representation: section 3.4-4 (Code of Professional Conduct)

Joint Retainers: sections 3.4-5 to 3.4-9 (Code of Professional Conduct)

Acting Against Former Clients: sections 3.4-10 to 3.4-11 (Code of Professional Conduct)

Acting for Borrower and Lender: sections 3.4-12 to 3.4-16 (Code of Professional Conduct)

Conflicts from Transfer Between Law Firms: sections 3.4-17 to 3.4-23 (Code of Professional Conduct)

Doing Business with a Client: sections 3.4-27 to 3.4-36 (Code of Professional Conduct)

Gifts and Testamentary Instruments: sections 3.4-37 to 3.4-39 (Code of Professional Conduct)

Judicial Interim Release: sections 3.4-40 to 3.4-41 (Code of Professional Conduct)

Related Topics:

Real Estate Transactions

Clients

Ethics

(Posted: June 12, 2020)