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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South Carolina Legal Ethics
1.7:100 Comparative Analysis of SC Rule
South Carolina Rule 1.7 and its comments are identical to Model Rule 1.7, except that the last paragraph of the comment deletes the following sentence that is found in the comments to the model rule: "In a criminal case, inquiry by the court is generally required when a lawyer represents multiple defendants."
1.7:200 Conflicts of Interest in General
Rules governing a lawyer's conduct whenever an actual or potential conflict of interest arises protect at least three interests. First, they reduce the likelihood of a lawyer improperly disclosing confidential information; second, they protect against a lawyer being placed in a position in which competing loyalties or responsibilities may cause the lawyer to represent the client with less than full vigor; and third, they preserve a client's reasonable expectations of loyalty arising out of the attorney-client relationship. See generally John Freeman, Conflicts of Interest: Multiple Ways to Lose, S.C. LAW., Mar.-Apr. 1996, at 11.
These interests of confidentiality, zealousness, and loyalty are at risk whenever there are potential or actual conflicts between the interests of the lawyer and those of the client, between the interests of several simultaneous clients, or between the interests of a former client and a current client. Every representation and every business dealing with a client ought to be reviewed carefully at the outset and throughout the course of the representation or transaction for potential conflicts of interest.
Rule 1.7(b) generally prohibits a lawyer from representing a client if "the 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" unless two conditions are satisfied. First, the lawyer must "reasonably believe the representation will not be adversely affected" by the other responsibilities or interests. Second, the lawyer must obtain the consent of the client after consultation.
The comment to Rule 1.7 focuses upon the loyalty expected by a client of its lawyer. That loyalty is "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 and interests." Rule 1.7, cmt. A lawyer is not disqualified from handling a matter, however, merely because a conflict is possible. The lawyer must consider the likelihood that an actual conflict will develop and whether any such conflict would "materially interfere" with the lawyer's professional judgment. If the lawyer is not able to conclude reasonably that the there will not be an adverse affect on the representation, the lawyer cannot undertake the representation, even with the client's consent.
There is little appellate case law in South Carolina to assist in defining when a representation is reasonable despite a potential conflict. In Bankers Trust of South Carolina v. Bruce, 283 S.C. 408, 323 S.E.2d 523 (Ct. App. 1984), a law firm was on retainer to a bank to provide legal advice in seven specific areas, excluding litigation. Debtors in a foreclosure action brought by the bank sought to employ the firm. Applying the old code requirement that it must be "obvious" that the firm could adequately represent the interests of both clients, the court found that the standard was met in part because, in representing the debtors, the firm was representing only one side in the foreclosure action. Also, the lawyer involved in the foreclosure defense had performed little of the work in prior foreclosures in which the firm had represented the bank. Thus it was very unlikely that the lawyer had any special insight that hampered representation of debtors. Finally, the court pointed out, if anyone could object, it would be the bank, and it had consented. See the discussion of the consent aspect of the Bankers Trust case in 1.7:240 below.
Rule 1.7(b) governs situations in which the interests do not conflict directly, but in which simultaneous representation may adversely affect the lawyer's ability to properly represent either or both of the clients. The test of Rule 1.7(b) is whether representation of one client may be materially limited by the representation of another client. See In re Morris, 270 S.C. 308, 241 S.E.2d 911 (1978) (lawyer persuaded client to act as surety for another client by misrepresenting facts and failing to disclose risks). See also In re Dobson, 310 S.C. 422, 427 S.E.2d 166 (1993) (decided under prior code). Again, the conflict may be waived by the client after consultation if the lawyer reasonably believes the representation will not be adversely affected. The representation of co-defendants is generally governed by Rule 1.7(b).
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Rule 1.7 permits representation even when there is a potential conflict if the lawyer reasonably believes the representation will not be adversely affected and if the client consents after disclosure. Once a potential conflict is identified, Rule 1.7 permits the conflict to be waived only if a reasonable lawyer could believe that the conflict will not adversely affect the representation of a client. In a few circumstances, particularly when there is a direct conflict in litigation, a lawyer may not undertake conflicting representation, even with consent of the clients. See S.C. Bar Ethics Adv. Ops. # 90-18, 81-13 (even if a divorce is uncontested and all issues appear settled, the same lawyer never may represent both the plaintiff and defendant). Although there is some adverse authority in other jurisdictions, the South Carolina Ethics Advisory Committee has held that a lawyer may prepare and submit responsive pleadings for an unrepresented adverse party, at least if the lawyer is not deemed to be representing that party under state law. S.C. Bar Ethics Adv. Op. # 90-18.
The rule does not attempt, however, to define what is adequate disclosure. Rule 1.7(b)(2) simply requires that the consultation "shall include explanation of the implications of the common representation and the advantages and risks involved." See In re Bell, 332 S.C. 6, 503 S.E.2d 731 (1998) (respondent committed misconduct by allowing a women involved in adopting a child to reasonably believe that respondent represented her interest in the matter, but not explaining to her whose interest he represented and not disclosing actual or potential conflicts of interest). Certainly a risk inherent in any reliance upon the client's consent to waive a conflict is that the court later will find the disclosure to have been inadequate. "Written consent, although not required by the rules, is preferable. The burden of proving consent rests with the attorney and will not be presumed." In re an Anonymous Member of the South Carolina Bar, 315 S.C. 141, 432 S.E.2d 467 (1993). See also ABA Formal Op. # 93-372 (prospective waivers of conflicts).
In Bankers Trust of South Carolina v. Bruce, 283 S.C. 408, 323 S.E.2d 523 (Ct. App. 1984) (see 1.7:220 above), a law firm agreed to represent debtors in a foreclosure action when the firm was on retainer to the plaintiff bank. The firm did not represent the bank in the foreclosure action. The firm told debtors of the retainer, although it did not specifically reveal the amount of retainer fees or the areas covered by the retainer. The debtors in writing acknowledged the retainer and requested that the firm continue representation in the foreclosure action. The bank also was notified and apparently did not object to the representation. The debtors subsequently moved to reopen a deficiency judgment, claiming a conflict of interest by the firm. The court held that the amount of the retainer fee was not material or relevant and did not have to be disclosed to obtain the consent of the clients. Disclosure of the fact of the retainer was sufficient. Also, while the firm failed to disclose the extent of the retainer agreement, the firm had told the debtors that it did not cover litigation, and the firm's statement that there was no conflict implied that the retainer did not cover foreclosures.
The court in Bankers Trust also pointed out that further disclosure beyond that given would have violated duties to protect confidential information. The comment to Rule 1.7 recognizes that in certain cases the rules protecting confidentiality may pose a problem for the lawyer attempting to proceed with consent. It may be impossible to obtain the necessary consent if one client refuses to permit the disclosure of information needed to permit the other client to make an informed decision.
1.7:250 Imputation of Conflict of Interest to Affiliated Lawyers [see 1.10:200]
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1.7:270 Positional Conflicts
Rule 1.7 does not prohibit a lawyer generally from representing competitors in the same market even though they may have competing economic interests. See Rule 1.7, cmt. Also a lawyer is not necessarily barred from making good faith assertions of inconsistent legal positions in different cases for different clients. The ethical question in such situations is whether either position would adversely affect the interest of the other client. "Thus it is ordinarily not improper to assert such positions in cases pending in different trial courts, but it may be improper to do so in cases pending at the same time in an appellate court." Rule 1.7, cmt. See ABA Formal Op. # 93-377 (addressing positional conflicts generally).
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1.7:300 Conflict of Interest Among Current Clients (Concurrent Conflicts)
Rule 1.7(a) prohibits any representation that would be directly adverse to the interests of an existing client unless the lawyer believes reasonably that "the representation will not adversely affect the relationship" between the lawyer and the existing client and each client consents after consultation. A key interest served by this rule is the client's expectation of loyalty on the part of the lawyer. Thus, as the comment to Rule 1.7 states, "a lawyer ordinarily may not act as advocate against a person the lawyer represents in some other matter, even if it is wholly unrelated." See also, S.C. Bar Ethics Adv. Op. # 81-17 (to protect interests of confidentiality and zealousness, a lawyer may not bring an action against a client, even if the matter is not related to the representation of the client.).
A lawyer who has represented husband and wife in connection with their business and certain real estate acquisitions should not represent one spouse in their divorce. In re Brown, 317 S.C. 25, 450 S.E.2d 586 (1994). The court in Brown applied Rule 1.7, rather than Rule 1.9, suggesting that the lawyer continued to represent both spouses at the time of the divorce, although that fact is not clear from the opinion.
Similar concerns appear in a leading South Carolina disqualification case decided when the old Code of Professional Responsibility was in effect, followed by a reminder that the problem is not always insurmountable. "[A]n adverse effect on an attorney's exercise of independent judgment is presumed when an attorney takes an adversary position toward another client. So long as full disclosure is given and the client's consent is obtained, multiple representation is allowed." Bankers Trust of South Carolina v. Bruce, 283 S.C. 408, 323 S.E.2d 523, 530 n.1 (Ct. App. 1984).
1.7:315 Insured-Insurer Conflicts [see also 1.8:720]
Insurance defense practice is another field in which multiple representation is frequent and the lawyer must be vigilant to identify the parties and obtain consent as necessary. When the interests of the insured and the insuror diverge, such as when a settlement demand exceeds policy limits or a coverage question arises, the lawyer must be prepared to withdraw from the entire matter. S.C. Bar Ethics Adv. Op. # 90-44.
The court has considered the common practice of representing a plaintiff against an insurance company who is a client in another matter. Although the practice may be permissible "in the appropriate case," the court warned that "it nevertheless presents a conflict situation that should be carefully analyzed by the attorney." In re an Anonymous Member of the South Carolina Bar, 315 S.C. 141, 432 S.E.2d 467 (1993) (dismissing disciplinary matter).
In a subsequent case, the court sanctioned a lawyer who failed to recognize a conflict of interest in simultaneously representing a plaintiff in a wreck case and the plaintiff's medical insuror, which had a subrogation claim against the plaintiff for bills already paid. In re Jones, 313 S.C. 9, 437 S.E.2d 10 (1993). It is not clear from the court's opinion whether an ethical violation could have been avoided had the lawyer obtained the proper consents. See also S.C. Bar Ethics Adv. Op. # 91-25.
Although Rule 1.7(b) does not bar absolutely the representation of multiple criminal defendants, the comment emphasizes the danger of such an undertaking. "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 codefendant." Rule 1.7, cmt.
When a criminal defendant claims that multiple representation violated the defendant's constitutional right to effective assistance of counsel, the defendant must show an actual conflict of interest to obtain relief under Cuyler v. Sullivan, 446 U.S. 335 (1980). In Goins v. State, 281 S.C. 427, 315 S.E.2d 121 (1984), one lawyer represented multiple codefendants who pled guilty and testified against another co-defendant. The mere fact of multiple representation did not violate the Sixth Amendment. If the defendant failed to object to multiple representation at trial, an actual conflict must be proven, and none was shown in this case.
A conflict may arise between clients even when they are not codefendants in the same matter. For example, in hearing an appeal for post-conviction relief in Duncan v. State, 281 S.C. 435, 315 S.E.2d 809 (1984), the court examined a situation in which a lawyer received information harmful to one client and beneficial to another client in a different case. The public defender's office represented two defendants in different matters. However, the second defendant was also a witness for the state in the first prosecution. The lawyer for both defendants knew of a prior inconsistent statement made to police by the second defendant regarding the first defendant. He did not disclose it to other counsel representing the first defendant believing that to do so would harm his client, the second defendant. The court found no actual conflict sufficient to constitute a violation of the defendant's Sixth Amendment rights. The court noted, however, that, since the police already knew of the inconsistent statement, it was not shown that the lawyer owed any duty to the second defendant not to reveal it. The lawyer should have notified the trial judge and sought guidance.
In State v. Nichols, 325 S.C. 111, 481 S.E.2d 118 (1997), Nichols, an individual convicted of voluntary manslaughter and criminal conspiracy, argued that it was unconstitutional to allow the solicitor in his case to utilize three private attorneys to help in the prosecution. The victim's family had hired the three attorneys to litigate the civil aspect of the case. The court held that "[a] special assistant solicitor is not automatically disqualified because of his simultaneous representation of an interested party." Because no evidence indicated that these private attorneys stood to gain an unfair advantage in the civil case by helping with the criminal prosecution, the court did not find error in the use of the private counsel. See S.C. Bar Ethics Adv. Op. # 97-41 (attorney who works part time as special prosecutor should not represent party in civil action where tortfeasor is being prosecuted by solicitor"s office; if attorney resigns position, attorney can represent plaintiff only if attorney complies with Rule 1.11).
In In re an Anonymous Member of the South Carolina Bar, 298 S.C. 163, 378 S.E.2d 821 (1989), the court held that a lawyer may represent the buyer at a real estate closing and also prepare the seller's deed. While multiple representation in real estate transactions is not per se improper, lawyers may be subject to malpractice liability or discipline if they fail to comply with the obligations of disclosure and consent set forth in Rule 1.7(b) and 2.2. See McNair v. Rainsford, 330 S.C. 332, 499 S.E.2d 488 (Ct. App. 1998) (questions of fact exist as to whether attorney consulted by seller and buyer to complete paperwork for sale of property violated the standard of care expected of attorneys); True v. Monteith, 327 S.C. 116, 489 S.E.2d 615 (1997) (cause of action stated against attorney who failed to disclose to lessee that he also represented lessor in connection with long-term lease transaction). See also S.C. Bar Ethics Adv. Ops. # 96-04 and # 98-17. In In re Solomon, 307 S.C. 1, 413 S.E.2d 808 (1992), a lawyer was suspended in part for representing two clients in a series of complicated real estate transactions after it was obvious that neither client trusted the other. The lawyer did not withdraw or discuss the conflict with the clients until one client sought to retain the lawyer to sue the other client. The court rejected the argument that the lawyer served only as scrivener and not as lawyer for the parties.
Although joint estate planning for a husband and wife may best serve the interests of both clients, the comment to Rule 1.7 notes that a conflict may arise in that situation. The comment, however, offers little guidance on avoiding or resolving the problem. See generally, Report of the Special Study Committee on Professional Responsibility of the Section of Real Property, Probate and Trust Law of the American Bar Association, Comments and Recommendations on the Lawyer's Duties in Representing Husband and Wife, 28 Real Prop. Prob. & Tr. J. 765 (1994).
Conflicts of interest can also arise in estate administration, often because of uncertainty about whom the lawyer represents. See Rule 1.7, cmt. See In re Jenkins, 313 S.C. 376, 438 S.E.2d 226 (1993) (conflict arose when lawyer represented both the estate and a personal representative who breached fiduciary duties to the estate); see also In re James, 267 S.C. 474, 229 S.E.2d 594 (1976) (hearing panel suggested that lawyer who served both as executor and as attorney for the estate owed a duty to estate beneficiaries to disclose dual capacities).
Legislation passed in 1994 declares that the creation of an attorney-client relationship with a fiduciary will not alone impose upon the lawyer duties to beneficiaries of the estate: "Unless expressly provided otherwise in a written employment agreement, the creation of an attorney-client relationship between a lawyer and a person serving as a fiduciary shall not impose upon the lawyer any duties or obligations to other persons interested in the estate, trust estate, or other fiduciary property." S.C. Code Ann. § 62-1-109 (Supp.). This provision does not foreclose the existence of a duty to a beneficiary, but provides that such a duty does not arise simply by virtue of the lawyer's role as attorney for the personal representative.
When representing a fiduciary, the lawyer's duties to the fiduciary are the same as they would be to any client. See ABA Formal Op. # 94-380. Thus, for example, the fiduciary is entitled to the same protection of confidential information as normally is afforded a client under Rule 1.6. Id. See also Report of the Special Study Committee on Professional Responsibility of the Section of Real Property, Probate and Trust Law of the American Bar Association, Counseling the Fiduciary, 28 Real Prop. Prob. & Tr. J. 825 (1994).
An attorney who represents an adoption agency cannot also represent potential adoptive parents in an uncontested adoption action since such representation would be materially limited by the attorney's responsibilities to the parents, adoption agency, and state. S.C. Bar Ethics Adv. Op. # 98-26.
A South Carolina Bar opinion advises that a lawyer who represents an individual in one matter should not simultaneously represent a second client suing a closely held corporation owned principally by the first client. S.C. Bar Ethics Adv. Op. # 91-24. However, a more recent ABA Opinion takes a different position. Over several dissenting views, the committee concluded that a corporate lawyer is not barred "from representing a party adverse to a particular corporation merely because the lawyer (or another lawyer in the same firm) represents, in an unrelated matter, another corporation that owns the potentially adverse corporation, or is owned by it, or is, together with the adverse corporation, owned by a third entity." The committee warned, however, that, although the lawyer does not necessarily represent all affiliates by virtue of the one representation, "the circumstances of a particular representation may be such that the corporate client has a reasonable expectation that the affiliates will be treated as clients, either generally or for purposes of avoidance of conflicts, and the lawyer is aware of the expectation." The committee urged as a "better course" that the lawyer seek consent from the corporate client. ABA Formal Op. # 95-390.
Lawyers frequently serve in capacities other than as attorneys. The comment to Rule 1.7 addresses the conflict that may arise when a lawyer serves as both director and lawyer for a client. The lawyer may be called upon, in the role of attorney, to advise the board on matters that the lawyer must deal with in the role of director. The likelihood of conflict might be particularly great, for example, when a lawyer for a closely held company is asked to serve as the third director along with the principal owners. Taking into account such matters as the likelihood and the potential intensity of any such conflict, the lawyer should not serve as a director if "there is material risk that the dual role will compromise" the lawyer's independent judgment. With consent after full disclosure, however, a lawyer apparently may serve as director of one bank while representing another bank in the same market. Also, a lawyer may serve as counsel to a bank of which the lawyer is a director, if the lawyer remains vigilant to the need not to confuse the interests of the client and those of the existing management. S.C. Bar Ethics Adv. Op. # 82-21.
1.7:400 Conflict of Interest Between Current Client and Third-Party Payor
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1.7:420 Lawyer with Fiduciary Obligations to Third Person [see 1.13:520]
Rule 1.7(b) prohibits a lawyer from undertaking, without appropriate consent, a representation "may be materially limited by the lawyer's responsibilities to another client or to a third person." The comment to Rule 1.7 elaborates, noting that the "critical questions are the likelihood that a conflict will eventuate and, if it does, whether it will materially interfere with the lawyer's independent professional judgment."
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