The Risk Manager, Fall 2007

Hypothetical: You jointly represent a long standing client and a new client in a business transaction. You obtain a written consent of waiver of a conflict of interest at the inception of the representation signed by both clients. Subsequently the clients fall out and the new client revokes his consent.

Queries: Must you withdraw from representing both clients? May you withdraw from representing the new client and continue representing the long standing client in the matter?

A recent North Carolina State Bar ethics opinion reasoned that whether the lawyer could continue to represent the other client when one client revoked a conflict waiver depended on:

• the nature of the conflict,
• whether the one client revoked consent because of a material change in circumstances,
• the reasonable expectations of the other client, and
• whether material detriment to the other client or the lawyer would result.

The opinion concluded that a lawyer is not required to withdraw from representing the other client if one client revokes consent without good reason and evaluation of the above factors indicates that continued representation is warranted.

The KBA Ethics 2000 Committee recommended the following addition to the comments to Kentucky Rule of Professional Conduct 1.7 that addresses conflict waiver repudiation. This addition reflects the ABA Model Rules position on this issue and tracks the North Carolina opinion. It is offered here for your information, but should not be considered authority unless and until the Supreme Court adopts it.

A client who has given consent to a conflict may revoke the consent and, like any other client, may terminate the lawyer's representation at any time. Whether revoking consent to the client's own representation precludes the lawyer from continuing to represent other clients depends on the circumstances, including the nature of the conflict, whether the client revoked consent because of a material change in circumstances, the reasonable expectations of the other clients and whether material detriment to the other clients or the lawyer would result.

This conflict issue has a number of variables too extensive to be covered here. For an in-depth consideration of the question read North Carolina State Bar 2007 Formal Ethics Opinion 11 (7/13/2007), Lawyer’s Duties when Client Revokes Consent to Conflict, and DC Legal Ethics Committee Opinion 317 (2002), Repudiation of Conflict of Interest Waivers. Both opinions are available on the Internet – just Google the bar Web sites.

The DC opinion recommends the risk management technique of covering conflict consent revocation in a letter of engagement and offers this sample language:

You have the right to repudiate this waiver should you later decide that it is no longer in your interest. Should the conflict addressed by the waiver be in existence or contemplated at that time, however, and should we or the other client(s) involved have acted in reliance on the waiver, we will have the right—and possibly the duty, under the applicable rules of professional conduct—to withdraw from representing you and (if permitted by such rules) to continue representing the other involved client(s) even though the other representation may be adverse to you.

Never forget that when all else fails in dealing with an ethics question, call the KBA Ethics Hotline for help. Get some insurance for resolving a tough question.