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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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Michigan Legal Ethics

1.7   Rule 1.7 Conflict of Interest: General Rule

1.7:100   Comparative Analysis of MI Rule

¥ Primary Michigan References: MI Rule 1.7
¥ Background References: ABA Model Rule 1.7, Other Jurisdictions
¥ Commentary:

1.7:101      Model Rule Comparison

Michigan adopted MR 1.7 exactly.

1.7:102      Model Code Comparison

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

1.7:200   Conflicts of Interest in General

¥ Primary Michigan References: MI Rule 1.7
¥ Background References: ABA Model Rule 1.7, Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 55:101, ALI-LGL ¤¤ 121-124, Wolfram ¤¤ 7.1-7.6
¥ MI Commentary: Dubin and Schwartz MRPC 1.7

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

1.7:210      Basic Prohibition of Conflict of Interest

The conflict rules in Michigan do not differ significantly from those of most other jurisdictions and are founded upon the universally acknowledged proposition that loyalty is an essential element in the lawyerÕs relationship to a client. If a conflict of interest exists before representation is undertaken, the representation should be declined. A lawyer has a duty to adopt reasonable procedures to determine the parties and issues involved in both litigation and non-litigation matters and whether there are actual or potential conflicts of interest. If an impermissible conflict arises after representation has been undertaken, the lawyer should withdraw from the representation.

Loyalty to a client may also be impaired when the lawyer cannot carry out an appropriate course of action for the client because of other responsibilities or interests.

A client may consent to representation notwithstanding a conflict. However, when a disinterested lawyer would conclude that the client should not agree to the representation under the circumstances, the lawyer cannot properly ask for such agreement or provide representation on the basis of the clientÕs consent. If more than one client is involved, the question of conflict must be resolved as to each client.

1.7:220      Material Adverse Effect on Representation

As stated above, a client may waive a conflict by giving consent to conflicting representation after consultation. However, the lawyer should not request such consent if there is a reasonable belief that the proposed representation will adversely affect the relationship with the existing client. If a disinterested lawyer would conclude the client should not agree to the representation under the circumstances, the lawyer involved should not ask for such agreement and should not offer or provide representation on the basis of the clientÕs consent.

1.7:230      Perspective for Determining Conflict of Interest

The perspective for determining conflict of interest is the proposition that loyalty is an essential element in the lawyerÕs relationship to a client. Loyalty to a client prohibits undertaking representation directly adverse to that client without the clientÕs consent, and a lawyer ordinarily may not act as an advocate against the person the lawyer represents in some other matter even if it is wholly unrelated. Moreover, if a lawyer has other responsibilities or interests which in effect foreclose alternatives that would otherwise be available to the client, the lawyerÕs loyalty to the client is also impaired. In that regard, a possible conflict does not itself preclude the representation but the lawyer must consider the likelihood whether a conflict will eventuate and, if it does, whether it will materially interfere with the lawyerÕs independent professional judgment in considering alternatives or foreclose courses of action that should reasonably be pursued on behalf of the client.

In People v Gardner, 406 Mich 369; 279 NW2d 785 (1979), the Michigan Supreme Court found that the joint representation of two defendants at trial by one lawyer deprived one of the defendants of the effective assistance of counsel because it was apparent that the testimony to be given would portray one defendant as being notably less culpable than the other. In Anchor Packing Co v Pro- Seal, Inc, 688 F Supp 1215 (ED Mich 1988), a law firm was disqualified from representing a plaintiff who was jointly represented by the law firm with the defendants in a prior action. In Schlossberg v State Bar Grievance Board, 388 Mich 389; 200 NW2d 219 (1972), the Michigan Supreme Court held that an attorney who is a member of the Michigan Employment Security Commission Appeal Board hearing cases involving employees of a corporation and who, at the same time was a member of a law firm representing wholly-owned subsidiaries of that corporation, has a conflict of interest. That conflict of interest can be purged by either the lawyer disqualifying himself from all cases before the Board involving the corporation or its subsidiaries, disassociating himself from the law firm of which he is a member, or terminating legal representation of the various corporate subsidiaries by his law firm.

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

See Discussion under 1.7:210 through 1.7:230 above.

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

See Discussion under 1.10 below.

1.7:260      Sanctions and Remedies for Conflicts of Interest

Among the remedies and sanctions for violation of this Rule are disqualification of the lawyer as counsel, Barkley v Detroit, 204 Mich App 194; 514 NW2d 242 (1994); liability for damages in a malpractice action, Lipton v Boesky, 110 Mich App 589; 313 NW2d 163 (1981); and disciplinary proceedings, State Bar Grievance AdmÕr v Estes, 392 Mich 645; 221 NW2d 322 (1974).

1.7:270      Positional Conflicts

Positional conflicts may arise under Subsection (b) of the Rule in that asserting a legal position on behalf of a new client may be limited by the lawyerÕs responsibilities to another client who is asserting a contrary position. Under those circumstances, the lawyer may seek consent of both clients to proceed with the representations if the lawyer reasonably believes that neither representation will be adversely affected.

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

Rule 1.7 is closely related to Rule 1.2 (Scope of Representation); Rule 1.8 (Conflict of Interest: Prohibited Transactions); Rule 1.9 (Conflict of Interest: Former Client); Rule 1.16 (Declining or Terminating Representation); Rule 2.2(c) (Intermediary); Rule 6.3 (Legal Services Organizations and Lawyer Referral Services); and Rule 6.4 (Law Reform Activities Affecting Client Interest).

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

¥ Primary Michigan References: MI Rule 1.7
¥ Background References: ABA Model Rule 1.7, Other Jurisdictions
¥ Commentary: ABA/BNA ¤¤ 51:101, 51:301, ALI-LGL ¤¤ 128-131, Wolfram ¤¤ 7.1-7.3
¥ MI Commentary: Dubin and Schwartz MRPC 1.7

1.7:310      Representing Parties with Conflicting Interests in Civil Litigation

Representation of parties whose interests in litigation may conflict, such as co-plaintiffs or co- defendants, is governed by Subparagraph (b). Conflicts may arise by reason of discrepancies in the partiesÕ testimony, incompatibility in positions and relations to an opposing party, or the fact that there are substantially different possibilities of settlement of claims or liabilities in question. In Barkley v Detroit, 204 Mich App 194; 514 NW2d 242 (1994), the Michigan Court of Appeals ruled that a conflict of interest arose when an attorney from the City Law Department represented both the City and the police officer of the City where both were named as defendants in a suit alleging police misconduct. The attorney could not represent the City, which was arguing no representation should be provided to the officer, as well as the officer. The court stated that the question was whether the representation of both parties would be Òmaterially limitedÓ, and clearly it was. With so many conflicting and potentially conflicting obligations of the attorney, the court ruled that it was impossible for an attorney reasonably to believe representation of both clients would not be adverse to their interests.

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

When an insurer and its insured have conflicting interests in the matter arising from a liability insurance agreement and the insurer is required to provide special counsel for the insured, the arrangement should ensure the special counselÕs professional independence. In a malpractice action against an attorney, the Michigan Supreme Court restated the universally recognized axiom that the tripartite relationship between the insured, the insurer and the defense counsel contains much possibility for conflict, as the interests of the parties frequently differ. Atlanta IntÕl Ins Co v Bell, 438 Mich 512; 475 NW2d 294 (1991). To best balance the interests of the parties, the court held that the doctrine of equitable subrogation should be invoked to allow the insurer to recover in a malpractice action because the interests of the insured and the insurer generally merge in this type of case. Id. at 523. The court held that Ò[a]llowing the insurer to stand in the shoes of the insured under the doctrine of equitable subrogation best serves the public policy underlying the attorney- client relationship.Ó Id. at 521.

In Informal Opinion RI-89, the State Bar has stated that when an insurer retains a lawyer to defend an insured, the insured is the lawyerÕs client and the lawyer must advocate the insuredÕs position even if it is adverse to the insurer. If a lawyer represents the insured and the insurer in a matter and one client later wishes the lawyer to assert a factually sustainable theory that serves that clientÕs interest but is adverse to the other, the lawyer must withdraw from representation of both clients.

1.7:320      Conflicts of Interest in Criminal Litigation

Conflicts of interest can arise in criminal as well as civil cases when one attorney represents multiple defendants. The potential for conflict of interest in representing multiple defendants in a criminal case is so grave that ordinarily a lawyer should decline representation of more than one co-defendant. On the other hand, common representation of persons having similar interests is proper if the risk of adverse effect is minimal and the requirements of Subparagraph (b) are met. See People v Gardner, 406 Mich 369; 279 NW2d 785 (1979).

1.7:330      Multiple Representation in Non-Litigated Matters

It is sometimes difficult to assess conflicts of interest in contexts other than litigation. The question is often one of proximity and degree. A lawyer should not represent multiple parties in a negotiation when their interests are fundamentally antagonistic to each other; but common representation is permissible where the clients are generally aligned in interest even though there is some difference of interest among them. Depending upon the circumstances, a conflict of interest may arise when a lawyer is called upon to prepare wills for several family members. The lawyer should make clear the relationships of the parties involved in estate administration. A lawyer who represents a personal representative of a decedentÕs estate in a fiduciary capacity may not represent the representative in an individual capacity on certain issues. Informal Opinion RI-79. An attorney who acted as trustee, as the agent of the co-trustee and as an attorney with the law firm representing both the buyer and seller of property belonging to the trust had a responsibility to avoid even the appearance of a conflict. The multiplicity of the attorneyÕs roles created a situation fraught with conflict that could not be avoided by simply withdrawing as trustee for purposes of approving the offer to purchase. In re Green Charitable Trust, 172 Mich App 298; 432 NW2d 492 (1998).

1.7:340      Conflicts of Interest in Representing Organizations

A lawyer for a corporation or other organization, who is also a member of its board of directors, should determine whether the responsibilities of the two roles may conflict. In other situations, the lawyer may be called upon to advise the corporation in matters involving actions of the directors, and consideration should be given to the frequency with which such situations may arise, the potential intensity of the conflict and other factors. If there is a material risk that the dual role will compromise the lawyerÕs independence or professional judgment, the lawyer should not serve as a director.

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 consultation and the arrangement ensures the lawyerÕs professional independence.

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

¥ Primary Michigan References: MI Rule 1.7
¥ Background References: ABA Model Rule 1.7, Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 51.901, ALI-LGL ¤ 134, Wolfram ¤ 8.8
¥ MI Commentary: Dubin and Schwartz MRPC 1.7

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

See Discussion under 1.7:315 above.

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

See Discussion under 1.7:340 regarding lawyers serving as members of the board of directors of corporations. See also Discussion under 1.7:330 above and In re Green Charitable Trust, supra.

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

¥ Primary Michigan References: MI Rule 1.7
¥ Background References: ABA Model Rule 1.7, Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 51:501, ALI-LGL ¤¤ 125-127, Wolfram ¤ 8.11
¥ MI Commentary: Dubin and Schwartz MRPC 1.7

See Discussion under 1.7:200 above.