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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.

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Pennsylvania Legal Ethics

1.7   Rule 1.7 Conflict of Interest: General Rule

1.7:100   Comparative Analysis of Pennsylvania Rule

Primary Pennsylvania References: PA Rule 1.7
Background References: ABA Model Rule 1.7, Other Jurisdictions
Commentary:

1.7:101      Model Rule Comparison

PA-R 1.7 closely parallels MR 1.7, which requires a lawyer not to represent a client where that representation will be "directly adverse" to another client. PA-R 1.7 differs from MR 1.7 in that it requires a lawyer to obtain client consent to any representation after full disclosure and consultation concerning the potential or actual conflict of interest. The Model Rules require only consultation, not full disclosure.

1.7:102      Model Code Comparison

DR 5-105(A) requires a lawyer to decline a potential client's case if the exercise of his independent professional judgment in behalf of another client will be or is likely to be "adversely affected," or if the case would involve him in representing "differing interests." DR 5-105(C) provides that "[i]n the situations covered by DR 5-105 (A) and (B), a lawyer may represent multiple clients if it is obvious that he can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each." DR 5-107(B) provides that "A lawyer shall not permit a person who recommends, employs, or pays him to render legal services for another to direct or regulate his professional judgment in rendering such legal services."

PA-R 1.7 and DR 5-105 are similar in that both are phrased in terms of adversity and both allow for adverse representations in certain circumstances. PA-R 1.7 goes beyond DR 5-105(A) in requiring that, when the lawyer's other interests are involved, not only must the client consent after consultation, but also that, independent of such consent, the representation reasonably appears not to be adversely affected by the lawyer's other interests. This requirement appears to be the intended meaning of the provision in DR 5-105(C) that "it is obvious that he can adequately represent" the client, and is implicit in EC 5-2, which states that "A lawyer should not accept proffered employment if his personal interests or desires will, or there is a reasonable probability that they will, affect adversely the advice to be given or services to be rendered the prospective client."

1.7:200   Conflicts of Interest in General

Primary Pennsylvania References: PA 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

1.7:210      Basic Prohibition of Conflict of Interest

PA-R 1.7(b) defines a conflict of interest as where the lawyer's representation of the client "may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests." PA-R 1.7 applies to four types of conflicts: those between the interest of a current client and (1) the lawyer's own interest, see 1.7:500, (2) the lawyer's duties to another current client, see 1.7:300, (3) the lawyer's duties to a former client, see 1.7:300, and (4) the lawyer's duties to a third person, see 1.7:400.

PA-R 1.7(a) & (b) relate to conflicts of interest with current clients. The Comment to PA-R 1.7, although not adopted as law in Pennsylvania, is used to give guidance in analyzing ethical problems. Phila. Eth. Op. 91-12 (1991). The relevant portion of that comment provides that "[a] client may consent to representation notwithstanding a conflict. However, as indicated in paragraph (a)(1) with respect to representation directly adverse to a client, and paragraph (b)(1) with respect to material limitations on representation of a client, when a disinterested lawyer would conclude that the client should not agree to the representation under the circumstances, the lawyer involved cannot properly ask for such agreement or provide representation on the basis of the client's consent."

Withdrawal or consent in typical cases of post-representation conflict.

For the general rule requiring withdrawal from all affected representations when a lawyer representing multiple clients confronts an unconsented conflict between the clients. In re Corn Derivatives Antitrust Litigation (3d Cir. 1984), (where firm had represented two plaintiffs in consolidated antitrust action who disagreed over proposed settlement, clients now have differing interests and firm must withdraw altogether); United States v. Moscony (E.D. Pa. 1988).

1.7:220      Material Adverse Effect on Representation

PA-R 1.7(a) applies only when the representation of one client would be directly adverse to the other. The Comment to PA-R 1.7 notes that "loyalty to a client is also impaired when a lawyer cannot consider, recommend or carry out an appropriate course of action for the client because of the lawyer's other responsibilities or interests. The conflict in effect forecloses alternatives that would otherwise be available to the client." Pa. Eth. Op. 93-12 (1993) (where one firm represented corporation retained by seller to sell property and seller, dispute arose between corporation and seller, parties were considered "directly adverse" and PA-R 1.7(a) precluded firm's continued representation of corporation and seller unless firm believed that representation would not adversely affect the firm's relationships with the clients and both clients consented after consultation); International Longshoremen's Ass'n v. International Longshoremen's Ass'n (E.D. Pa. 1995) (where counsel are defending one client against claims brought by another client it is "the most direct" of conflicts and therefore satisfies "directly adverse" requirement).

1.7:230      Perspective for Determining Conflict of Interest

The Third Circuit Court of Appeals has noted that the perspective that should be evaluated when determining whether a conflict of interest exists is whether the "average layman" would see an impropriety. In re Eastern Sugar Antitrust Litigation, (3d Cir. 1982).

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

Clients may give informed consent to representation despite a conflict of interest.

Requirement of Consultation.

A client's being aware of the conflict is not sufficient to fulfil PA-R 1.7's consent requirement. International Longshoremen's Ass'n v. International Long Shoremen's Ass'n (E.D. Pa. 1995) (noting that requirement calls for more than mere "awareness" of possible conflict of interest and that actual consultation is required); Office of Disciplinary Counsel v. Wittmaack (1987) (having client sign document at conclusion of conflicted representation that simply stated consent to multiple representation failed to comply with requirements of timely notice or proper disclosure); see also, PA-R, Terminology ("Consultation" requires "communication of information reasonably sufficient to permit the client to appreciate the significance of the matter in question."); International Business Machines Corp. v. Levin, (3d Cir. 1978) ("Clearly, full and effective disclosure of all the relevant facts must be made and brought home to the prospective client."). A former client may consent to the lawyer's representation of another client with adverse interests, but the lawyer should have strong documentation of informed consent before proceeding with the representation to protect himself or herself. The Pennsylvania Supreme Court has been suspicious of assertions that an ex-client has released his or her lawyer from full adherence to the lawyer's duty of loyalty to the former client, and has sought assurance that the former client truly understood what he or she was agreeing to when he or she gave consent to a potential conflict of interest. Maritrans GP Inc. v. Pepper, Hamilton & Scheetz, (1992) (firm preliminarily enjoined from representing former client's competitors despite fact that former client had at one point consented to such representation after firm agreed to construct "Chinese wall").

Non-consentable conflicts in litigation.

Where parties are clearly adverse, with both cases centering around the same facts, a lawyer cannot represent them both without directly violating PA-R 1.7(a). Such a conflict cannot even be waived with informed consent because an independent outside attorney would not condone such dual representation. Phila. Eth. Op. 89-24 (1989).

Non-consentable conflicts in litigation--duties of lawyer.

Where direct conflict is evident lawyer should not consult with both plaintiffs as consultation may preclude representation of either party, and requesting waiver of conflict from plaintiffs is not ethically permissible, as disinterested lawyer would conclude plaintiffs should not agree to dual representation. Phila. Eth. Op. 91-12 (1991).

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

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

1.7:260      Sanctions and Remedies for Conflicts of Interest

The remedy of an injunction against further representation is illustrated by Maritrans GP, Inc. v. Pepper, Hamilton & Scheetz, (1992). Slater v. Rimar, Inc. (1975) (case dismissed without prejudice where lawyer for plaintiff had been lawyer for defendant).

1.7:270      Positional Conflicts

A law firm may represent clients in different cases where the firm must take adverse positions on the same issue that, when resolved, will be of material significance to both parties. A conflict is present, so disclosure must be made to each client and consent must be obtained. This representation would not be permissible on the appellate level since the result in one case could have a negative impact on the other case. The use of a Chinese wall would not be sufficient to address the conflict situation nor would it avoid imputed disqualification if a disqualifying conflict were present. Phila. Eth. Op. 89-27 (1990). A law firm can simultaneously represent an insurance company (the "Insurer") and other clients (the "Insureds") in different lawsuits in which the same legal question(s) will arise, the resolution of which will be of material significance to both Insureds and Insurer, provided the law firm discloses to each client that it represents both the Insurer and the Insureds in law suits involving environmental coverage issues and that in the course of these representations, it may obtain legal rulings adverse to the interests of either the Insurer or the Insureds, provided that (a) the Insureds are not insured by the Insurer (but are instead insured by other insurance companies with policy provisions similar or identical to the policies issued by the Insurer); (b) the Insureds and the Insurer are not adverse in any of the specific lawsuits handled by the law firm; and (c) the clients have consented, in writing, to representation by the law firm, after appropriate disclosure. Phila. Eth. Op. 89-27 (1990).

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

Rule 1.10(a) provides: While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7, 1.8(c), 1.9 or 2.2. If a conflict arises after representation has been undertaken, the lawyer should withdraw from the representation. PA-R 1.16.

Where more than one client is involved and the lawyer withdraws because a conflict arises after representation, whether the lawyer may continue to represent any of the clients is determined by PA-R 1.9. PA-R 2.2(c). As to whether a client-lawyer relationship exists or, having once been established, is continuing, see Comment to PA-R 1.3 and PA-R, Scope.

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

Primary Pennsylvania References: PA 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

When more than one client is involved, the question of conflict must be resolved as to each client. There is a "strong presumption against concurrent representation of clients with directly conflicting interests." Hazard & Hodes, The Law of Lawyering, 1.7:203 (1990). Because "it is unreasonable to postulate trusting relationships" in such circumstances, "a lawyer should not be allowed to sue an individual client on behalf of another present client, even if the lawyer represents the first client in a wholly unrelated matter." See id. Where the matters are related and the representation will be directly adverse, "client consent will not suffice and indeed should not even be sought." Id. The representation of two parties in an automobile accident, one of whom may be wholly or partially at fault, is a direct conflict which requires withdrawal. Id.; see also, Tran v. Meyers, (E.D. Pa. 1995).

1.7:310      Representing Parties with Conflicting Interests in Civil Litigation

PA-R 1.7(a) prohibits representation of opposing parties in litigation. Simultaneous representation of parties whose interests in litigation may conflict, such as co-plaintiffs or co-defendants, is governed by PA-R 1.7(b). A lawyer may represent parties having antagonistic positions on a legal question that has arisen in different cases, unless representation of either client would be adversely affected. Should a lawyer wish to represent two plaintiffs against a defendant, but where there is evidence that one of the plaintiffs may have behaved negligently, a lawyer may not represent both plaintiffs. Common representation is permissible where the clients are generally aligned in interest even though there is some difference of interest among them.

Effect of Conflict on Receipt of Referral Fee.

Where a lawyer is approached by a passenger who has been injured as a result of the driver's negligence and the driver, the lawyer cannot receive a referral fee where he or she is representing either the driver or passenger. With clients whose interests are adverse, if a referral fee is to be accepted by the lawyer, the lawyer's personal economic interest (i.e. in maximizing the recovery for the referred client, thereby obtaining the largest possible referral fee), is directly adverse to the lawyer's client's interests in maximizing recovery from all available sources. Phila. Eth. Op. 91-12 (1991); Phila. Eth. Op. 89-23 (1989) (a lawyer should not refer an adverse party for fee as lawyer's financial interests could impact lawyer's ability to get best result for client).

Non-consentable conflicts in concurrent representation.

The concept of informed consent "applies to cases where the circumstances are such that possibly conflicting interests may permissibly be represented by the same attorney. But, manifestly, there are instances where the conflicts of interest are so critically adverse as not to admit" of such representation. Jedwabny v. Philadelphia Transp. Co. (1957) (holding concurrent representation of driver in accident and his passenger with opposing interests on issue of driver's negligence absolutely barred); see also, Vanderveer Group v. Petruny, (E.D. Pa. 1994).

Clients that are potentially aligned in opposition to each other.

Where a lawyer represents clinics that are separately incorporated as well as a corporation that performs administrative services for the clinics, PA-R 1.7 requires the lawyer to disclose whether she feels that a conflict would arise in the representation of the Corporation and one or more of the clinics/clients, or in representation of one clinic against another clinic, this problem should be addressed at that time by disclosing the factors which lead the lawyer to that conclusion, explaining in detail the ramifications of the dual representation, and seeking and receiving consent from both clients. If the disclosure is given and consent received, the lawyer is authorized to proceed, but if a conflict does arise in the course of the employment, absent consent by the Corporation and clinic, the lawyer would be precluded from representing either party based upon PA-R 1.7. Phila. Eth. Op. 93-1 (1993); Allman v. Sears, Roebuck & Co. (E.D. Pa. 1988) (under PA-R 1.7 counsel cannot create "Chinese Wall" or "Cone of Silence" to permit continuation of simultaneous adverse representation, and PA-R 1.7 calls for disqualification when client will not consent to adverse representation).

Although joint representation is permissible, under PA-R 1.7(b), when the clients' relationship places them on opposite side in litigation on the matter in which the attorney advised them, the prohibition against representation of opposing parties, under PA-R 1.7(a) prevails. United States v. Moscony (3d Cir. 1991) ("A substantial relationship between successive representations often triggers concerns about divided loyalties and conflicts of interest." (citation omitted) To determine whether there is a substantial relationship, courts have identified three factors: (a) What is the nature and scope of the prior representation at issue? (b) What is the nature of the present lawsuit against the former client? (c) In the course of the prior representation, might the client have disclosed to his attorney confidences which could be relevant to the present action?); see also, INA Underwriters Ins. v. Nalibotsky (E.D. Pa. 1984) (lawyer must consider whether such confidences could be detrimental to former client in current litigation)]; Ragan v. Hughes (E.D. Pa. 1992) (noting factors to be evaluated when determining whether law firm's representation is inextricably intertwined with a particular dispute); see also Pa Eth. Op. 89-102 (1989) (a lawyer who represents passenger against driver in automobile case and informs driver of this fact may continue to represent passenger after lawyer briefly interviews driver and mistakenly processes his medical claims. Submitting the claims for driver is de minimis act and does not create conflict of interest).

Representation of co-plaintiffs.

The existence of potential claims among co-plaintiffs does not make joint representation automatically improper. Hamilton v. Merrill Lynch (E.D. Pa. 1986) (joint representation of multiple plaintiffs proper, despite the potential for crossclaims among them); see also Capriotty v. Bell (E.D. Pa. Feb. 19, 1991) (Hamilton case demonstrates that where potential claims among co-parties are speculative and co-parties agree not to pursue them, full and adequate representation of their common interests is not impaired, yet when claims are clear and likely to be pressed, direct conflicts remain among co-parties, despite their temporary alliance toward a common objective); see also, In re Corn Derivatives Antitrust Litigation (3d Cir. 1984) (where lawyer had represented two plaintiffs in multi-district case, improper for lawyer to represent one of them in later attach on settlement that other plaintiff approved).

Suing present client in unrelated matter.

Among the leading cases are IBM v. Levin (3d Cir. 1978) (lawyer may not take case against regular client even though not representing that client in a current matter). In this same vein, a lawyer may not undertake representation of an automobile accident victim if the lawyer already represents the owner of the car involved in the accident in a workers' compensation matter. Such representation would breach the conflict of interest rules because it would place the lawyer in a position adverse to an existing client. Pa. Eth. Op. 90-90 (undated).

Public and government officials.

A lawyer may serve as county solicitor, borough authority solicitor, and retained counsel for a local bank so long as the multiple representation does not impair the lawyer's judgment or dilute his loyalty to his clients under DR 5-105(B) & (C). Pa. Eth. Op. 87-36 (1987).

Representation of former employee when lawyer has corporation as a client.

Under PA-R 1.7(a)(1), a lawyer cannot represent former employee of corporation who was fired by the corporation and is being sued by the corporation, and a major shareholder and the corporation itself, even if the parties consent to mutual representation. The Committee noted that it was in the former employee's interest to explore the possibilities of an amicable resolution of the corporation's claims, especially in view of the apparent fact that the corporation intends to apply maximum pressure to the former employee to elicit her cooperation. If the former employee is being threatened with or actually subject to criminal prosecution, her interest would obviously be adverse to that of the shareholder and/or the corporation, since it would be in the interest of the shareholder and/or the corporation to discourage the former employee from reaching a settlement with the corporation in order to maintain their defense to its claims. The lawyer may not represent any of the clients without violating PA-R 1.6. Phila. Eth. Op. 88-12 (1988).

Initiation and settlement of class actions and other multiple-client representations.

In supervising class actions, the trial court should assure that the class action is indeed being conducted for the benefit of the class. Kramer v. Scientific Control Corp. (3d Cir. 1976) (lawyer for class may not also be class representative).

With regard to attorney's fees negotiated in settlement of class action, in Prandini v. National Tea Co. (3d Cir. 1977), the court held that a lawyer for a class representative was prohibited from negotiating the issues of attorney fees when negotiating the relief, if any, that the class should obtain.

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

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

1.7:320      Conflicts of Interest in Criminal Litigation

Concurrent representations of criminal defendants.

The 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. However, a lawyer may be able to represent two defendants where the defendants's stories are consistent and lawyer believes that neither representation will be adversely affected by the other and he effects full disclosure and consultation with both defendants as to the potential for conflicts of interest. Pa. Eth. Op. 90-150 (undated) (lawyer permitted to represent two defendants in drug prosecution, one of whom was driver of car in which drugs were found, the other of whom owned and had loaned car to driver and both of whom deny knowledge of how drugs came to be in car).

Waiver of conflict by co-defendant.

Where waiver is not permitted, later claims of prejudice are likely to result. United States v. Flanagan (3d Cir. 1982) (no error to disqualify joint counsel where defendants were group of police officers accused of misconduct whose stories were likely inconsistent and lawyer might have to cross-examine witnesses differently on behalf of each).

Referrals by prosecutors and public defenders.

A prosecutor or public defender generally may refer a crime victim to a law firm for civil representation depending upon the facts of a particular situation. No referral fees may be paid nor may any quid pro quo be given. Full disclosure to, consultation with, and consent of the client are necessary. Phila. Eth. Op. 91-24 (1991). Other courts, however, have concluded that public defender's offices are law firms per se. Commonwealth v. Westbrook (1979).

Disqualification of prosecutors and public defenders.

In appropriate circumstances, a prosecutor may suggest that the defendant's rights are being prejudiced by a common representation. Pirillo v. Takiff (1975) (government complains that joint representation is hampering grand jury investigation); see also, Pa. Eth. Op. 90-132 (undated) (a criminal defense lawyer may not serve as prosecutor in neighboring county, even on emergency basis, as representing criminal defendants and prosecuting criminals in same state creates conflict of interest that cannot be waived, even if representations take place in different counties); Pa. Eth. Op. 88-167 (undated) (where a lawyer serves as a part-time district attorney, he may not represent a wife in a domestic relations matter if, in his official capacity, he may have to prosecute the husband for spousal abuse, as there is a risk that the lawyer might use information gained in the husband's criminal prosecution to advance the wife's civil case).

1.7:330      Multiple Representation in Non-Litigated Matters

Conflicts of interest in contexts other than litigation sometimes may be difficult to assess. Relevant factors in determining whether there is potential for adverse effect include the duration and intimacy of the lawyer's relationship with the client or clients involved, the functions being performed by the lawyer, the likelihood that actual conflict will arise and the likely prejudice to the client from the conflict if it does arise. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved. Commonwealth v. Cassidy (Super. Ct. 1989).

Transactional: representation of buyer and seller.

A lawyer who represents a couple in the sale of their business may not also represent the couple's son and nephew, who are the buyers in the transaction, because of the high probability that conflicts of interest will arise. The representation is prohibited even if the couple insists that the lawyer handle the transaction and if the lawyer discloses the risks involved to all parties. Pa. Eth. Op. 88-197 (undated); Pa. Eth. Op. 88-210 (undated) (providing that lawyer who represents sellers in real estate transactions may not refer sellers to real estate agent and share commission that agent earns on sale of property).

Transactional: representation of lender and borrower.

A lawyer who agreed to represent both a lender and a borrower in a transaction after full disclosure and consent by both parties must withdraw from both representations when the lawyer learns in confidence that the borrower is having financial difficulties that may destroy the deal. However, if the borrower permits the lawyer to disclose the financial information to the lender, the lawyer may continue the representations. Pa. Eth. Op. 90-80 (undated).

Wills.

A lawyer may not offer his services to a church to draft wills for church members on the understanding that they will name the church as a beneficiary. Pa. Eth. Op. 88-9 (undated). A lawyer may prepare wills for clients referred to him by a non-profit religious and charitable corporation and may charge the clients a reasonable fee for legal services performed; however, the lawyer may not bill the corporation for the legal services or accept as payment a percentage of bequests made to the corporation. Pa. Eth. Op. 88-172 (undated); Pa. Eth. Op. 88-156 (1988) (discussing guidelines to determine whether conflict prevents law firm from drafting will in which partner of firm will be beneficiary).

Executors.

Conflict questions may also arise in estate planning and estate administration. A lawyer may withdraw from representing two executors of an estate if a dispute between the clients arises which concerns the disposition of certain estate property and the clients cannot amicably resolve the dispute. Upon withdrawing, the lawyer must advise the clients to retain separate counsel. Pa. Eth. Op. 87-40 (1987).

Clients with known differences to resolve.

Continental Coiffures, Ltd. v. Kimble (Super. Ct. 1979) (where common lawyer worked out settlement of restrictive covenant dispute between two parties, employer cannot subsequently argue conflict of interest in attempt to void settlement).

1.7:340      Conflicts of Interest in Representing Organizations

Under PA-R 1.13, a lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other constituents, subject to the provisions of PA-R 1.7. When a corporation and its directors or employees are involved in a controversy in which they have conflicting interests, the corporation may provide funds for separate legal representation of the directors or employees, if the clients consent after full disclosure and consultation and the arrangement ensures the lawyer's professional independence.

Challenge to policy of organization.

A lawyer for an organization may defend an organization's management or procedures from challenge by constituents until a tribunal rules on the organization's best interests. Seifert v. Dumatic Indus., Inc. (1964) (where one of two 50% shareholders sued corporation and other shareholder to dissolve entity and other counter-sued to keep it alive, corporate counsel should represent both corporation and stockholder who opposed dissolution).

Stockholders and corporations.

When choosing to represent an organization in such a situation, it is important to also consider PA-R 1.9, dealing with conflict of interest issues of former clients. Pa. Eth. Op. 91-173 (1991) (law firm that represented now bankrupt corporation as an entity in general matters, but not in negotiating loans to company that were secured by mortgages on stock-holders/officers' residences, may subsequently represent certain stockholders/officers who were assigned mortgages from bank and now want to pursue foreclosure actions against stockholders/officers who were sureties and co-makers on corporation's loans because the subsequent representation is not directly adverse to former representation); Pa. Eth. Op. 88-150 (undated) (lawyer who represents closely held corporation with two principal shareholders, A and B, and who is employed by shareholder A to file suit against shareholder B on behalf of corporation may represent both corporation and shareholder A when shareholder B joins shareholder A as defendant in the suit if: (1) lawyer gained no confidential information from shareholder A that would create ethical dilemma; (2) representation of corporation was for limited time and lawyer has no information that would require him to testify at trial; (3) the interests of corporation and shareholder A are exactly the same; (4) lawyer disclosed risks of dual representation to shareholder A; and (5) lawyer determines that no actual or potential conflict of interest exists).

Parent-subsidiary litigation.

A lawyer suing a parent corporation may be disqualified if he or she is concurrently representing a 51% owned subsidiary of the parent only when there is a substantial relationship between the matters. Vanderveer Group, Inc., v. Petruny, (E.D. Pa. 1994).

Competition.

A lawyer who represents a partnership that is planning a business venture may also represent an individual who plans to operate a competing concern in the same area. There is no disqualifying conflict of interest based on potential economic competition. Although the conflict of interest rule does not require consent of both clients in such a situation, obtaining consents of each party is a prudent course of action. Pa. Eth. Op. 91-09 (undated).

Duties of lawyer that represents only an organization.

A lawyer who represents only an organization is not required to keep confidential from others in the organization information obtained from an employee or agent that is personally harmful to the individual who communicated it. Every employee or agent is legally required to provide information to the organization concerning matters within the scope of employment. Thus, the individual may not assert the attorney-client privilege for communications made to the organization's lawyer, even if the communications prove to be harmful to the person. In re Bevill, Bresler & Schulman Asset Management Corp., (3d Cir. 1986) (communication by officer could not be claimed by officer as privileged against corporation).

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

Primary Pennsylvania References: PA Rule 1.7
Background References: ABA Model Rule 1.7, Other Jurisdictions
Commentary: ABA/BNA 51.901, ALI-LGL 215, 216, Wolfram 8.8

Compensation or direction by third person.

A lawyer may be paid from a source other than the client, if the client is informed of that fact and consents and the arrangement does not compromise the lawyer's duty of loyalty to the client. See PA-R 1.8(f).

Third-party payors in criminal cases.

Pirillo v. Takiff (1975) (proper to disqualify single lawyer being paid by police fraternal order and representing all 12 policemen called before grand jury investigating police department corruption).

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

A law firm can simultaneously represent an insurance company (the "Insurer") and other clients (the "Insureds") in different lawsuits in which the same legal question(s) will arise, the resolution of which will be of material significance to both Insureds and Insurer, provided the law firm discloses to each client that it represents both the Insurer and the Insureds in law suits involving environmental coverage issues and that in the course of these representations, it may obtain legal rulings adverse to the interests of either the Insurer or the Insureds, provided that (a) the Insureds are not insured by the Insurer (but are instead insured by other insurance companies with policy provisions similar or identical to the policies issued by the Insurer); (b) the Insureds and the Insurer are not adverse in any of the specific lawsuits handled by the law firm; and (c) the clients have consented, in writing, to representation by the law firm, after appropriate disclosure. Phila. Eth. Op. 89-27 (1990).

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 Pennsylvania References: PA Rule 1.7
Background References: ABA Model Rule 1.7, Other Jurisdictions
Commentary: ABA/BNA 51:501, ALI-LGL 206-208, Wolfram 8.11

Lawyer's personal interest affecting representation of a client.

The lawyer's own interests should not be permitted to have an adverse effect on representation of a client. For example, a lawyer's need for income should not lead the lawyer to undertake matters that cannot be handled competently and without charging an illegal or clearly excessive fee. PA-R 1.1 and PA-R 1.5. If the probity of a lawyer's own conduct in a transaction is in serious question, it may be difficult or impossible for the lawyer to give a client detached advice. A lawyer may not allow related business interests to affect representation, for example, by referring clients to an enterprise in which the lawyer has an undisclosed interest.

Loans to a client.

A lawyer may make a personal loan to a client that will not be used in connection with any pending litigation if the lawyer reasonably believes the loan will not create a conflict between the lawyer's interests and the client's interests, the terms of the transaction are fair and reasonable, and the lawyer complies with the requirements of the rule on entering into business transactions with clients. Thus, the lawyer must disclose the terms of the transaction in writing that is understandable to the client, advise the client to secure independent legal counsel regarding the loan, give the client a reasonable opportunity to seek counsel, and obtain the client's written consent to the transaction. Pa. Eth. Op. 90-84 (1990).

Wills.

A lawyer may revise a will that he previously drafted on behalf of a partner's client, where the revision makes bequests to the partner of paintings done by the client which are of unknown value and are in addition to bequests of a similar nature to the partner in the original will if the lawyer determines that representation of the client is not adversely affected by the partnership relationship and a written waiver is obtained from the client. However, the lawyer may not draft a will on behalf of the client's wife which bequests three more of the paintings to the lawyer himself. Pa. Eth. Op. 90-146 (1990).

Criminal law.

Lawyer's failure to plea-bargain found to create a conflict between lawyer's personal interests and those of his client where lawyer's contingent fee arrangement was valueless unless his client was acquitted. The court noted: "It is hard to imagine a more striking example of blatant conflict between personal interest and professional duty . . . . A conflict of interest arises where the lawyer is faced with the task of giving advice to the client on optional courses of action where the lawyer stands to benefit personally from the adoption of one course to the exclusion of the other . . . . To put it bluntly, by advising the persistence in a not guilty plea, [the lawyer] had nothing to lose but his client's life." United States ex. rel. Simon v. Murphy, (E.D. Pa. 1972).