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End-of-life notice: American Legal Ethics Library

As of March 1, 2013, the Legal Information Institute is no longer maintaining the information in the American Legal Ethics Library. It is no longer possible for us to maintain it at a level of completeness and accuracy given its staffing needs. It is very possible that we will revive it at a future time. At this point, it is in need of a complete technological renovation and reworking of the "correspondent firm" model which successfully sustained it for many years.

Many people have contributed time and effort to the project over the years, and we would like to thank them. In particular, Roger Cramton and Peter Martin not only conceived ALEL but gave much of their own labor to it. We are also grateful to Brad Wendel for his editorial contributions, to Brian Toohey and all at Jones Day for their efforts, and to all of our correspondents and contributors. Thank you.

We regret any inconvenience.

Some portions of the collection may already be severely out of date, so please be cautious in your use of this material.


New Jersey Legal Ethics

1.7   Rule 1.7 Conflict of Interest: General Rule

1.7:100   Comparative Analysis of New Jersey Rule

Primary New Jersey References: NJ Rule 1.7
Background References: ABA Model Rule 1.7, Other Jurisdictions
Commentary:
NJ Commentary: Section 17:1, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000)

1.7:101      Model Rule Comparison

Unlike the Model Rule, New Jersey’s RPC 1.7 provides that a government agency cannot consent to representation if a conflict of interest exists or if the appearance of such a conflict exists. See RPC 1.7 subparagraphs (a) (2) and (b) (2).

RPC 1.7 also differs from the Model Rule in that to waive a conflict it requires each client’s consent after “full disclosure of the circumstances and consultation with the client[.]” The Model Rule, by contrast, requires consent only following “consultation.”

New Jersey is one of a small number of jurisdictions that continue to adhere to the “appearance of impropriety” doctrine. See Matter of Petition for Review of Opinion No. 569, 103 N.J. 325, 329-330 n.4 (1986). The appearance of impropriety doctrine is retained in RPC 1.7(c), which also provides that case law and ethics opinions interpreting the standard still apply. Under that standard, even in the absence of an actual conflict of interest, an attorney may be precluded from representing a particular client if the representation would create an appearance of impropriety.

1.7:102      Model Code Comparison

There is no direct counterpart in the New Jersey RPCs.

1.7:200   Conflicts of Interest in General

Primary New Jersey References: NJ Rule 1.7
Background References: ABA Model Rule 1.7, Other Jurisdictions
Commentary: ABA/BNA § 55:101, ALI-LGL §§ 201-204, Wolfram §§ 7.1-7.6
NJ Commentary:

[The discussion of this topic has not yet been written.]

1.7:210      Basic Prohibition of Conflict of Interest

RPC 1.7, entitled “Conflict of Interest: General Rule,” prohibits a lawyer from representing a client if the representation will be “directly adverse” to another client of the lawyer, or if the representation will be “materially limited” by the lawyer’s responsibilities to another client, to a third party, or by the lawyer’s own interests.

As the New Jersey Supreme Court has noted, “[o]ne of the most basic responsibilities incumbent on a lawyer is the duty of loyalty to his or her clients. From that duty issues the prohibition against representing clients with conflicting interests.” Matter of Opinion No. 653, 132 N.J. 124, 129 (1993). See also Opinion 682 of the Adv. Comm. on Prof. Ethics, 147 N.J. 360, 368 (1997) (attorney must not serve “two masters with incompatible interests.”) See Section 17:1, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000).

1.7:220      Material Adverse Effect on Representation

[The discussion of this topic has not yet been written.]

1.7:230      Perspective for Determining Conflict of Interest

Under RPC 1.7(a)(1), the attorney’s inquiry into the propriety of the dual representation is critical: the lawyer must “reasonably believe” that the representation will not “be adversely affected” by the conflict. Notwithstanding the attorney’s belief and the client’s consent, the representation might still be challenged as unreasonable in light of the facts and circumstances of the conflict.

When a lawyer is faced with a conflict situation within the meaning of RPC 1.7(a) or (b), client consent alone is insufficient to cure the problem. The lawyer must also reasonably believe that neither the relationship with the adverse client nor the present representation will be adversely affected. The Debevoise Committee has stated that this language “appear[s] to incorporate a combined subjective and objective test for determining when conflicts of interest would prevent representation.” Report of the New Jersey Supreme Court Committee on the Model Rules of Professional Conduct, N.J.L.J., July 28, 1983, supp. at 5. What is required, according to the Committee, is a subjective judgment consistent with an objective standard of reasonableness. That is, a lawyer may not merely rely upon his or her own subjective belief that he or she can adequately represent multiple clients; a reasonably prudent lawyer must be able to draw the same conclusion under the circumstances. See id. at 5-6. See Section 19:1-1, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000).

1.7:240      Client Consent to a Conflict of Interest; Non-Consentable Conflicts

In many of the opinions in which client consent to a conflict has been disregarded, the court or the committee has relied on the “appearance of impropriety” doctrine to disapprove the representation at issue, suggesting that an appearance of impropriety may not be “cured” by consent or waived by the affected clients. The New Jersey Supreme Court explained in Reardon v. Marlayne, Inc., 83 N.J. 460, 477 (1980), that in matters involving an appearance of impropriety, there is a duty to the general public as well as to the parties involved in a particular case. Consequently, the Reardon Court refused to permit client consent to operate as a waiver in a situation that seemed to involve both an actual conflict and an appearance of impropriety. See id. at 475, 477.

See also N.J. Advisory Comm. on Professional Ethics Op. 678 (Nov. 21, 1994) and Op. 679 (July 17, 1995), indicating that a representation may be prohibited by the “appearance of impropriety” doctrine even when both clients have consented to a conflict of interest.

Both RPC 1.7(a)(2) and RPC 1.7(b)(2) provide that a public entity cannot consent to a conflict of interest involving it and another of its lawyer’s current clients. This was intended “to preserve New Jersey’s rule that a government agency cannot consent to representation if a conflict of interest exists or if the appearance of such a conflict exists.” Rules of Professional Conduct, Comment to RPC 1.7, N.J.L.J., July 19, 1984, supp. at 3.

There are several statements in New Jersey case law or Advisory Committee opinions to the effect that one lawyer may not represent adverse parties in a litigation matter even with the consent of both prospective clients. See DeBolt v. Parker, 234 N.J. Super. 471, 479 (Law Div. 1988) and Advisory Comm. Op. 486 (June 18, 1981). See Section 26:4-2, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000).

1.7:250      Imputation of Conflict of Interest to Affiliated Lawyers [see 1.10:200]

RPC 1.10(a) is the primary imputed disqualification rule in New Jersey; it applies to any group of lawyers currently practicing in close association. See Dewey v. R.J. Reynolds Tobacco Co., 109 N.J. 201, 217 (1988). Thus, the initial question is whether any individual lawyer presently associated with a firm, a professional corporation, or some other practice group is disqualified from a representation because of a conflict of interest. See id. at 212. If the answer is yes, then RPC 1.10(a) applies to prohibit all of the other lawyers at the firm from engaging in the representation. RPC 1.10(a) also governs when an attorney moves from one firm to another. See Dewey, supra, at 212-217.

The New Jersey Supreme Court in Dewey treated RPC 1.10 (b) as an additional basis for precluding an individual lawyer from a representation because of a prior relationship. See Dewey, supra, at 222.

A limited exception exists for former government attorneys barred from a representation by the appearance of impropriety. If a former government lawyer is disqualified from a representation because of an appearance of impropriety arising from his or her prior government service, a firm with which that attorney is associated may nevertheless engage in the representation, as long as the former government lawyer is “screened” from the case and the firm gives the appropriate government agency prompt written notice of its involvement in the matter. See RPC 1.11(b).

For examples of the use of screening, see Ross v. Canino, 93 N.J. 402, 409 (1983), allowing a law firm to continue to represent a party in litigation adverse to a real estate developer, but only if one of the firm’s partners was screened from the matter. The partner was a former State Attorney General who had been in office when the State Department of Justice conducted an investigation of the real estate developer. See id. at 406. The New Jersey Supreme Court allowed screening, rather than ordering the disqualification of the firm, despite the fact that the former Attorney General had been made aware of the issuance of subpoenas in connection with the investigation of the developer. While this level of knowledge of the matter created an appearance of impropriety sufficient to preclude the former Attorney General’s personal participation in the matter, the New Jersey Supreme Court concluded that it did not constitute the type of substantial contact required to disqualify a former government lawyer’s firm from a representation. See id. at 408-409. See Section 24:1-1, 25:2 and 25:3-2, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000).

1.7:260      Sanctions and Remedies for Conflicts of Interest

An attorney who is found to have represented conflicting interests in violation of the provisions of the RPCs is, of course, subject to discipline by the New Jersey Supreme Court. See Matter of Berkowitz, 136 N.J. 134, 147-148 (1994), reprimanding two law partners who engaged in conflicting representations.

In a litigation matter, a lawyer who is guilty of a conflict of interest may be disqualified from the case for conflict of interest on motion of opposing counsel, see Dewey v. R.J. Reynolds Tobacco Co., 109 N.J. 201, 204, 208-209 (1988), or on the court’s own motion. See ABA Model Rules of Professional Conduct Rule 1.7 comment (1989). In addition, a lawyer or a law firm undertaking a representation that presents a potential conflict may be required to forfeit any right to collect a fee relating to the matter. See Dewey, supra, at 219-220. The forfeiture penalty is intended to prevent an attorney from profiting from his or her disregard of the RPCs. See Dewey, supra, at 219-220. Finally, a lawyer may be subject to civil liability for malpractice if the client suffers harm as a result of the attorney’s failure to observe the rules regarding conflicts of interest. See Lieberman v. Employers Ins. of Wausau, 84 N.J. 325, 338-340 (1980). See Section 17:5, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000).

1.7:270      Positional Conflicts

[The discussion of this topic has not yet been written.]

1.7:280      Relationship to Other Rules (e.g., MRs 1.13, 2.2, 5.7, 6.3, 6.4)

[The discussion of this topic has not yet been written.]

1.7:300   Conflict of Interest Among Current Clients (Concurrent Conflicts)

Primary New Jersey References: NJ Rule 1.7
Background References: ABA Model Rule 1.7, Other Jurisdictions
Commentary: ABA/BNA §§ 51:101, 51:301, ALI-LGL §§ 209-212, Wolfram §§ 7.1-7.3
NJ Commentary:

See Section 1.7:310 below.

1.7:310      Representing Parties with Conflicting Interests in Civil Litigation

RPC 1.7(a) clearly prohibits the representation of opposing parties in the same litigation. In New Jersey, the courts and the Advisory Committee have adhered strictly to this rule that “a lawyer ordinarily may not act as advocate against a person the lawyer represents in some other matter, even if it is wholly unrelated.” ABA Model Rules of Professional Conduct Rule 1.7 comment (1989). See Whitman v. Estate of Whitman, 259 N.J. Super. 256 (Law Div. 1992).

In Petition for Review of Opinion 552, 102 N.J. 194, 208 (1986), the New Jersey Supreme Court ruled that one attorney may represent multiple defendants in a lawsuit if there is no actual conflict of interest between the parties or if “the likelihood of an actual conflict of interests is remote and poses no realistic threat to the effective representation of such multiple defendants.” The New Jersey Supreme Court also stated that if there is a potential conflict of interest, representation of multiple defendants may be permissible, provided that the lawyer complies with the requirements of the RPCs. Id. On the other hand, if an actual conflict subsequently develops between the interests of the multiple defendants, the lawyer “shall be obligated to terminate such joint representation and initiate steps for the separate representation of the defendants.” Id. at 209. See Section 19:2-1, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000).

1.7:315      Insured-Insurer Conflicts [see also 1.8:720]

The New Jersey Supreme Court has stated that “[l]atent conflicting interests are always present as between an insured and an insurer.” Lieberman v. Employers Ins. of Wausau, 84 N.J. 325, 340 (1980). These latent conflicts can manifest themselves in a variety of ways. For example, the insurer may assert at the outset that the incident forming the basis for the insured’s claim is beyond the scope of the policy’s coverage. See Burd, supra, at 387. In addition, facts may come to light at trial indicating that the insurer may have a reason to deny coverage. See Montanez, supra, at 280-281. Finally, the insurer may wish to settle the claim, while the insured insists on proceeding with a trial. See Lieberman, supra, at 340. If such a conflict of interest develops, the attorney owes his or her primary allegiance to the insured and may be required to withdraw from the matter completely. See Lieberman, supra, at 338-339; Montanez, supra, at 286; Advisory Comm. Op. 502 (Sept. 23, 1982).

For example, if an actual conflict arises with respect to whether coverage is available under the terms of the policy, counsel retained to represent the insured in the underlying action may not appear on behalf of the either the insurer or the insured in a proceeding brought to resolve the question of coverage. See Advisory Comm. Op. 502, supra; Advisory Comm. Op. 165 (Dec. 18, 1969).

In some circumstances, when potential conflicts have not yet risen to the level of actual conflicts, a lawyer’s dual representation of an insurer and an insured may be permissible, as long as both the insured and the insurance carrier give their informed consent after full disclosure. For example, in Advisory Comm. Op. 357 (Dec. 2, 1976). See also Burd v. Sussex Mutual Insurance Company, 56 N.J. 383, 389 (1970), stating that “[t]here may be cases in which the interests of the carrier and the insured coincide so that the carrier can defend such an action with complete devotion to the insured’s interest” ; Schmidt v. Smith, 294 N.J. Super. 569, 590 (App. Div. 1996), certif. granted 148 N.J. 461 (1997). See Section 19:2-1, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000).

1.7:320      Conflicts of Interest in Criminal Litigation

In criminal matters, the New Jersey Supreme Court has adopted what “amounts to an absolute bar to multiple representation unless defendants are fully advised of the potential problems involved.” State v. Bellucci, 81 N.J. 531, 545 (1980). See also ABA Model Rules of Professional Conduct Rule 1.7 comment (1989), stating that “[t]he potential for conflict of interest in representing multiple defendants in a criminal case is so grave that ordinarily a lawyer should decline to represent more than one co-defendant.” See also New Jersey Court R. 3:8-2 (no attorney can represent more than one defendant in a multi-defendant indictment without the permission of the court). See Section 19:2-1, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000).

1.7:330      Multiple Representation in Non-Litigated Matters

The New Jersey Supreme Court disapproved of attorneys “plac[ing] themselves in a position of negotiating for both sides in the same transaction” in Opinion 682 of the Adv. Comm. on Prof. Ethics, 147 N.J. 360, 368 (1997). That case involved an attorney serving as agent for a title insurance company while simultaneously representing the purchaser of real estate in a transaction in which the company would be issuing a title policy. The New Jersey Supreme Court described the antagonistic nature of the relationship between the title company and the purchaser as follows:

In the most basic terms, the purchaser seeks the maximum possible protection, as the success of any future claim depends on limiting exceptions and obtaining the most comprehensive coverage to protect against loss. The title company’s interest is opposed to that of the purchaser; it strives to limit liability as much as possible in the event of a claim under the policy.

Id. And see Baldasarre v. Butler, 132 N.J. 278, 296 (1993), stating that even consensual dual representation in connection with the negotiation of a contract may be impermissible “where large sums of money are at stake, where contracts contain complex contingencies, or where options are numerous.” See Section 19:2-4, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000).

1.7:340      Conflicts of Interest in Representing Organizations

When a lawyer who regularly represents a corporation or some other entity is called upon to represent an employee or officer of the corporation in either a personal matter or a matter connected with the employer’s business, the attorney’s primary duty is to the organization. See RPC 1.13(a), (b). For example, in Advisory Comm. Op. 655 (Dec. 5, 1991), the Committee held that a municipal attorney’s representation of a township committee member in a personal matter was not per se prohibited, but if there was any possible divergence between the municipality’s interests and the committee member’s interests, the attorney would be precluded from undertaking the personal matter for the committee member.

Similarly, in Advisory Comm. Op. 509 (Jan. 6, 1983), a pre-RPC opinion, the Committee ruled that a corporation’s lawyer could not represent one of the corporation’s employees in connection with an application for a license from a state agency, unless the lawyer obtained the consents of both clients after a full disclosure of the circumstances. The Committee reasoned that the lawyer might receive information from the employee that would be relevant to the employer’s business but damaging to the employee if it were disclosed to the employer. Thus, the attorney’s “paramount” obligation to the corporate client would infringe upon his or her ability to devote complete loyalty to the employee.

In a potential conflict situation, RPC 1.7 requires not only the informed consents of both the organizational and the individual client to the simultaneous representation, but also the attorney’s reasonable belief that neither attorney-client relationship will be adversely affected. See Section 19:3-1, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000).

1.7:400   Conflict of Interest Between Current Client and Third-Party Payor

Primary New Jersey References: NJ Rule 1.7
Background References: ABA Model Rule 1.7, Other Jurisdictions
Commentary: ABA/BNA § 51.901, ALI-LGL §§ 215, 216, Wolfram § 8.8
NJ Commentary:

[The discussion of this topic has not yet been written.]

1.7:410      Insured-Insurer Conflicts [see 1.7:315 and 1.8:720]

[The discussion of this topic has not yet been written.]

1.7:420      Lawyer with Fiduciary Obligations to Third Person [see 1.13:520]

[The discussion of this topic has not yet been written.]

1.7:500   Conflict of Interest Between Current Client and Lawyer's Interest [see also 1.8:200]

Primary New Jersey References: NJ Rule 1.7
Background References: ABA Model Rule 1.7, Other Jurisdictions
Commentary: ABA/BNA § 51:501, ALI-LGL §§ 206-208, Wolfram § 8.11
NJ Commentary:

RPC 1.7(b) also prohibits a lawyer from undertaking a representation that may be materially limited by the lawyer’s own interests, unless the affected client consents after full disclosure. This provision is typically implicated when the lawyer stands to derive some benefit, in addition to a legal fee, from the matter or transaction with respect to which he or she is advising the client. See Advisory Comm. Op. 353 (Sept. 23, 1976), stating that a lawyer for a local planning board may not advise the board with respect to a matter in which he or she has a personal, financial, business, or property interest. See also Matter of Haft, 146 N.J. 489 (1996), suspending an attorney in part for undertaking a representation that was materially limited by the attorney’s own interests. And see Matter of Berkowitz, 136 N.J. 134, 145-146 (1994).

The additional benefit to be derived by the attorney need not be monetary. In fact, the benefit may be the avoidance of civil or criminal liability. See Circle Chevrolet v. Giordano, Halleran & Ciesla, 142 N.J. 280, 291-292 (1995), noting that a lawyer’s potential liability to a client for malpractice may cause a conflict of interest under RPC 1.7(b), necessitating the client’s consent to continued representation after the lawyer becomes aware that he or she has made an error; State v. Rivera, 232 N.J. Super. 165, 178-179 (App. Div.), certif. den. 117 N.J. 169 (1989), disqualifying under RPC 1.7(b) two defense lawyers who allegedly engaged in a scheme to have the defendant marry the chief witness against him. The Rivera court held that the lawyers’ possible criminal liability would hamper their representation of the defendant.

See also Andre Const. Assoc. v. Catel, Inc., 293 N.J. Super. 452, 457 (Law Div. 1996), suggesting that a conflict situation because of the lawyer’s own interests may develop when a client files a fee arbitration request.

With respect to the conflict issues raised by referral fees, see Advisory Comm. Op. 681 (July 17, 1995), stating that the possibility of a referral fee may interfere with a lawyer’s independent judgment concerning what type of referral would be in the client’s best interests. See also Eagan by Keith v. Jackson, 855 F. Supp. 765, 788 (E.D. Pa. 1994), applying New Jersey law and concluding that the acceptance by a lawyer for an incompetent person of a referral fee from a certified trial attorney created a conflict because of his dual role as guardian of the client. The district court required the lawyer to forfeit the referral fee to the incompetent person’s estate.

Most often, however, it will be a secondary, or non-legal-fee, financial benefit that will result in an attorney’s disqualification or discipline under the “lawyer’s own interests” prong of RPC 1.7(b). For example, if the attorney has an interest in a business that will earn a commission as a result of a transaction in which the client is involved, the attorney may be disqualified from the representation even if the client consents to the arrangement. See Opinion 682 of the Adv. Comm. on Prof. Ethics, 147 N.J. 360, 369 (1997). See also Advisory Comm. Op. 463 (Dec. 11, 1980), holding that an attorney may not represent a buyer/mortgagor of real estate, even with informed consent, when the attorney has originated the financing for the transaction with a mortgage broker on a referral fee basis. See Section 19:3-2, Michels, New Jersey Attorney Ethics (Gann Law Books, Newark, 2000).