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.
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Oregon Legal Ethics
1.7:100 Comparative Analysis of Oregon Rule
The DRs do not have a “general rule” regarding conflicts of interest. Rather, DR 5-101 addresses conflicts of interest stemming from lawyer’s self-interest, DR 5-102 speaks to the permissibility of a lawyer as witness, DR 5-104 proscribes a lawyer entering into a business transaction with a client except under certain circumstances, and DR 5-105 spells out the conflicts of interest operative when a lawyer has two more current or former clients whose interests are adverse. Further, DR 5-105 describes the imputation of conflicts of interest to the lawyer’s firm, as well as avoiding that imputation through the process of screening the disqualified lawyer. DR 5-109 and 5-110 speak to conflicts of interest after public employment and due to sexual relations with clients, respectively.
DR 5-101(A) is substantially similar to its ABA Model Code counterpart.
Subject to enumerated exceptions, DR 5-102(A) proscribes a lawyer acting as a trial advocate for a client when that lawyer is likely to be called as a witness at that trial. MC DR 5-101(B) extends this prohibition to all lawyers in the disqualified lawyer’s firm, whereas the DR 5-102(B) expressly permits a lawyer to act as a trial advocate even though another lawyer in the lawyer’s firm is likely to be called as a witness on the client’s behalf.
Just as MC DR 5-102(B) does, DR 5-102(C) speaks to the possibility that, after “undertaking employment in contemplated or pending litigation, a lawyer learns or it is obvious that the lawyer or a member of the lawyer’s firm may be called as a witness other than on behalf of the lawyer’s client,” the lawyer may continue to represent the client until “it is apparent that the lawyer’s or firm member’s testimony is or may be prejudicial to the lawyer’s client.” Unlike the DRs, MC DR 5-102(A) also provides that a lawyer shall withdraw from representation if, after undertaking employment in contemplated or pending litigation, it is obvious that the lawyer or a member of her or his firm ought to be called as a witness on behalf of the client.
DR 5-103(B) of both the ABA Model Code and the DRs generally prohibit the acquisition of interest in litigation, subject to exceptions. Both also permit a lawyer to “advance or guarantee the expenses of litigation,” but MC DR 5-103(B) spells out that such expenses include “court costs, expenses of investigation, expenses of medical examination, and costs of obtaining and presenting evidence.”
DR 5-104 is substantively similar to its ABA Model Code counterpart.
MC DR 5-105(A) provides that a lawyer “shall decline proffered employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, or if it would be likely to involve him in representing differing interests.” The DRs do not have a direct counterpart.
MC DR 5-105(C) provides that “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.” In Oregon, DR 5-105(F) permits a lawyer to “represent multiple current clients . . . when such representation would not result in an actual conflict and when each client consents to the multiple representation after full disclosure.”
MC DR 5-105(D) speaks to the imputation of a lawyer’s conflict of interest to other lawyers affiliated with him or her, as does Oregon’s DR 5-105(H), but the Oregon rule also provides for the screening of the disqualified lawyer.
1.7:200 Conflicts of Interest in General
Pursuant to DR 5-105(B), attorneys are charged with all knowledge regarding conflicts of interests that a reasonable investigation would reveal. Once the facts or knowledge reasonably attributable to the attorney have been determined, the nature and extent of any conflict present questions of law. In re Johnson, 300 Or 52, 61, 707 P2d 573 (1985).
The multiple-client conflicts rules can briefly be summarized in terms of veto power. Subject only to exceptions for subjective conflicts or conflicts of a general economic or business nature, current clients always have veto power to prevent their attorneys from acting adversely to them. Indeed, in some situations—called “actual conflicts”—attorneys cannot proceed adversely to a current client even with consent.
Former clients also have veto power, but it is much more limited. Former clients can prevent their former attorneys from acting adversely to them only if the attorney learned confidences and secrets from them that could be used adversely to them (“information-specific conflicts”) or if the present and former representations are part of sufficiently factually related matters (“matter-specific conflicts”). Unlike current clients, however, former clients can always consent after full disclosure.
DR 5-105(A)(3) explains that “[a] conflict of interest is not present solely because one or more attorneys in a firm assert conflicting legal positions on behalf of different clients whom the lawyers represent in factually unrelated cases. If, however, a lawyer actually knows of the assertion of the conflicting positions and also actually knows that an outcome favorable to one client in one case will adversely affect the client in another case,” the attorney must withdraw from representation unless he or she receives all the clients’ consent to continue after full disclosure. (Emphasis added.)
DRs articulate a hierarchy for assessing conflicts between current clients that is based on the likelihood that the attorney’s exercise of independent judgment would be adversely affected: (1) actual conflicts, (2) likely conflicts, and (3) unlikely conflicts. See DR 5-105(A), (B), (E), (F).
For former clients, an Oregon attorney represent a current client adversely to a former client unless the matters for the current and former clients are “significantly related.” DR 5-105(C). Whether matters are “significantly related” is assessed according to whether the representation is “matter-specific” or “information-specific” such that the lawyer’s representation in a subsequent matter would, or would likely, inflict injury or damage upon the former client.
Per DR 5-105(F), client consent is unavailable in the context of actual conflicts. Nor is client consent available in the context of conflicts arising from sexual relations with clients under DR 5-110.
For other conflicts of interest, a client may consent to representation only after a lawyer’s full disclosure (as defined in DR 10-101(B)). When an entity such as a corporation is asked to consent, normal agency rules apply.
In seeking consent, an attorney should disclose matters that a reasonably prudent person might wish to consider or that the attorney would inquire about if the attorney were free from conflicts and were advising a client whether or not to grant consent. In re Montgomery, 297 Or 738, 741-42, 687 P2d 157 (1984). As with disclosure and consent under DR 5-101 and 5-104, the attorney making disclosure and seeking consent under DR 5-105 must recommend that the client seek independent legal advice before consenting and must confirm the consent in writing. Any consent obtained on less than full disclosure, as defined in DR 10-101(B), is ineffective as a matter of law. See, e.g., In re Jeffery, 321 Or 360, 898 P2d 752 (1995); In re Alstatt, 321 Or 324, 897 P2d 1164 (1995).
OSB Legal Ethics Op No 1991-122 holds that advance waivers of future conflicts are governed by the same standards that apply to waivers of other types of conflicts. This means advance or blanket waivers are enforceable as long as no actual conflicts emerge and there has been full disclosure of all material facts.
1.7:250 Imputation of Conflict of Interest to Affiliated Lawyers [see 1.10:200]
In State ex rel Bryant v. Ellis, 301 Or 633, 638-39, 724 P2d 811 (1986), the Oregon Supreme Court observed that the right to disqualify counsel is an inherent part of a court’s right to prevent breaches of trust and to control the proceedings before it. The Bryant opinion made clear that disqualification may be sought regardless of whether litigation is then under way. If, for example, a former client has reason to believe that its former counsel is using its confidential information to assist a competitor, a disqualification motion would be in order. The citations in Bryant to federal case law indicate that Oregon law will develop along similar lines.
Disqualification motions are not a substitute for disciplinary proceedings, and grounds for discipline may exist even when grounds for disqualification do not. The converse is also true.
In disciplinary proceedings, for example, a violation must be established by clear and convincing evidence, whereas no such elevated burden is present in a disqualification motion. Similarly, there is no limitations period for disciplinary proceedings, but a motion for disqualification may be denied if it is not timely brought.
Absent special circumstances, there must generally be not only an actual or threatened violation of a DR, but also a risk of prejudice to the movant—or at least a risk of a severe affront to the judicial system—before a disqualification motion will be granted.
Absent undue delay in filing a motion, the presence of an actual conflict between current clients or a likely conflict between current clients for which consent based on full disclosure has not been obtained should result in disqualification if the movant is a current client or, at minimum, is aligned with a current conflict. See Home Mortgage Co. v. Sitka Co., 148 Or 502, 540, 36 P2d 1038 (1934).
A disqualification motion brought by a former client, or by someone aligned with a former client, should result in disqualification if the motion is timely brought and if an information-specific conflict would otherwise exist. In fact, it is common to grant such motions based on little more than the movant’s allegation that pertinent confidences were provided to the attorney whose disqualification is sought, unless that attorney can clearly establish that pertinent confidences could not have been conveyed.
As a general proposition, former-client conflicts that are purely matter-specific are also likely to result in disqualification under Oregon law, even though this need not always be the result of federal cases not involving Oregon law.
Interlocutory appeals of decisions on disqualification motions are not available in federal courts, and it is quite likely that Oregon will take the same position. The requirement to prove actual prejudice to the merits of the case will make posttrial relief for disqualification motions difficult, if not impossible, to obtain in most cases.
If one of the firms acting as co-counsel for a party is disqualified, the other firm need not be disqualified unless it received, or perhaps cannot prove that it did not receive, confidences or secrets from the disqualified firm that were pertinent to the matter at issue. Similarly, it appears the better rule is that a firm that is withdrawing due to an order of disqualification can turn over to a succeeding firm only documents or information that can be shown, with or without the aid of the court on an in-camera basis, to be free of taint.
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1.7:300 Conflict of Interest Among Current Clients (Concurrent Conflicts)
• Primary OR References:
• 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
• OR Commentary: EOL §§ 6.4-.7, 12.7-.16
The standards that apply to conflicts between multiple current clients of an attorney are more strict than those that apply to conflicts between current and former clients. The attorney’s duty of loyalty is greater in scope while the attorney-client relationship is ongoing.
Differentiation between a current and former client can be difficult. Generally, when a client has a reasonable, ongoing expectation of a relationship with a firm based on a history of past work, courts may view the relationship as a current client relationship even though, as of a particular date, the lawyer is not actually doing any work for the client. See, e.g., In re Galton, 289 Or 565, 581, 615 P2d 317 (1980); see also OSB Legal Ethics Op No 1996-146 (current client relationship may exist when attorney sends periodic reminders to past clients about need for further action regarding completed matters, unless communication makes clear that attorney-client relationship has terminated).
1.7:310 Representing Parties with Conflicting Interests in Civil Litigation [see also 1.7:210]
DR 5-105(A)(1) defines an “actual conflict” as one involving situations in which “the lawyer has a duty to contend for something on behalf of one client that the lawyer has a duty to oppose on behalf of another client.” Such a conflict arises whenever an attorney necessarily or by clear implication has been hired by one client to contend for something on that client’s behalf that the attorney necessarily or by clear implication has been hired by another client to oppose. An actual conflict exists whenever an attorney endeavors to represent at the same time the opposing sides of a single transaction or matter. See, e.g., In re Phelps, 306 Or 508, 760 P2d 1331 (1988) (simultaneous representation of two brothers who were in disagreement as to how to dissolve their partnership); In re Schenck, 5 DB Rptr 83 (1991) (attorney had actual multiple-client conflict in preparing contract for both buyer and seller). Representation of spouses in marital dissolution proceedings will constitute, in virtually all cases, an actual, unwaivable conflict under DR 5-105. In re McKee, 316 Or 114, 849 P2d 509 (1993).
DR 5-105(A)(3) prohibits an attorney from continuing representation of multiple clients in factually unrelated cases if the “lawyer actually knows of the assertion of the conflicting positions and also actually knows that an outcome favorable to one client in one case will adversely affect the client in another case.” Pursuant to DR 5-105(B), attorneys are charged with all knowledge that a reasonable investigation would reveal. In re Harrington, 301 Or 18, 29, 718 P2d 725 (1986). Although conflicts arising under DR 5-105(A)(3) are eligible for client consent after full disclosure, actual conflicts arising under DR 5-105(A)(1) are not.
Practitioners should note that the term “actual conflict” in Oregon has a specific, defined meaning; non-Oregon cases may use the term differently. See Sanders v. Ratelle, 21 F3d 1446 (9th Cir 1994).
DR 5-105(A)(2) defines “likely conflicts” as including “all other situations in which the objective personal, business or property interests of the clients are adverse,” except for “situations in which the only conflict is of a general economic or business nature.” A likely, as opposed to actual, conflict arises whenever an attorney attempts on behalf of one client to take a position adverse to another client on related matters. See OSB Legal Ethics Op Nos 1991-122, 1991-77, 1991-40; In re Carey, 307 Or 315, 767 P2d 438 (1989). But see In re Bristow, 301 Or 194, 204-05, 721 P2d 437 (1986) (actual conflict when attorney was obligated to uphold, on behalf of one client in one case, validity of franchise system that he was simultaneously attacking on behalf of another client in another case).
Likely conflicts of interest can, however, evolve over time into actual conflicts. See In re Barber, 322 Or 194, 904 P2d 620 (1995); In re Jeffery, 321 Or 360, 898 P2d 752 (1995).
“Unlikely conflicts” are not defined in the DRs, since they do not require special disclosure or consent. The client-conflict rules do not come into play when only the subjective interests of a client may be adversely affected, as distinct from the client’s objective personal or business interests. DR 5-105 is also inapplicable by its terms when a conflict is only indirect and of a general economic or business nature. DR 5-105(A)(2). However, the mere fact that a DR 5-105 violation may not be present in a particular situation does not mean that other DR violations might not be present. See, e.g., OSB Legal Ethics Op No 1991-119.
Although it is clearly impermissible to represent both the plaintiff and the defendant in litigation, the permissibility of representing either multiple plaintiffs or multiple defendants in litigation depends on the facts of the case. At one extreme, an attorney cannot represent multiple plaintiffs or defendants who are, or clearly should be, actively pursuing cross-claims against each other, because an actual conflict would be present. See, e.g., OSB Legal Ethics Op Nos 1991-86, 1991-46.
When, on the other hand, the risk of a conflict is remote, an actual conflict should not be present and the conflict may be likely or unlikely. See OSB Legal Ethics Op No 1991-86 (in general, neither actual nor likely conflict is present when attorney undertakes to represent both spouses in joint bankruptcy proceeding).
An attorney who is considering representing multiple plaintiffs or defendants in litigation should consider, and discuss with the clients, the risk that if an actual conflict later develops or if the prior consent proves to be invalid and the renewed consent is not granted, the attorney may be unable to continue representing anyone. See In re Johnson, 300 Or 52, 60, 707 P2d 573 (1985); OSB Legal Ethics Op Nos 1991-86, 1991-82.
1.7:315 Insured-Insurer Conflicts [see also 1.8:720]
An attorney who represents an insured in an insurance defense situation in which the insurer is paying the legal fees has two clients: the insured and the insurer. See, e.g., OSB Legal Ethics Op Nos 1991-121, 1991-77. DR 5-105 is implicated if the interests of the two clients diverge.
If the insurer has accepted a tender of defenses and is defending the case without any reservation of rights, and if the maximum claim is within the policy limits, there will ordinarily be no actual or likely conflict between insurer and insured. OSB Legal Ethics Op No 1991-121.
If, on the other hand, the insurer is defending the case subject to reservation of rights, if some claims in the complaint are covered by the insurance policy while others are not, or if the maximum amount claimed exceeds the policy limits, it is possible that a conflict could arise. When the interests of the insurer and the insured diverge, the attorney hired by the insurer to defend the insured must act to protect the insured’s interests. If the insurer wishes to take some other action to protect its interests that is detrimental to the interests of the insured, it must do so through other counsel. OSB Legal Ethics Op No 1991-121.
Similarly, an attorney could not defend the insured in the underlying action while simultaneously prosecuting a declaratory judgment action to establish a lack of coverage on the insurer’s behalf, since that would constitute an actual conflict. However, an attorney who has previously advised the insurer that it may have a defense to coverage or to a duty to pay may subsequently represent the insured in the underlying action if both the insurer and insured consent. OSB Legal Ethics Op No 1991-77.
Courts are much more willing to find an actual conflict (for which consent after full disclosure is not available) when an attorney jointly represents multiple criminal defendants than when civil defendants are involved. Compare In re Shannon, 297 Or 168, 681 P2d 794 (1984) (civil case; joint representation allowed), with In re O’Neal, 297 Or 258, 683 P2d 1352 (1984). O’Neal holds that if there is a potential for a material divergence of position between would-be jointly represented criminal defendants concerning even the initial strategy relating to plea bargains, they must not be jointly represented. Nevertheless, there is not an absolute prohibition on simultaneous representation of multiple criminal defendants. OSB Legal Ethics Op No 1991-82.
Pursuant to DR 5-105(A)(1), an actual conflict exists whenever an attorney endeavors to simultaneously represent the opposing sides of a single transaction or matter. The disclosure-and-consent exception does not apply. See, e.g., In re Jordan, 300 Or 430, 712 P2d 97 (1985).
DR 5-106(A) also prohibits a lawyer-mediator from acting as a lawyer for any of the relevant parties in the matter in mediation or any related proceeding. A member of the mediating lawyers firm “may accept or continue the representation of a party in the matter in mediation or in a related matter if all parties to the mediation consent after full disclosure.” DR 5-106(C).
The client-conflict rules do not come into play when only the subjective interests of a client may be adversely affected, as distinct from the objective personal or business interests of the client. DR 5-105 is also inapplicable by its terms when a conflict is only indirect and of a general economic or business nature (e.g., helping a client’s competitor become a more effective competitor).
However, depending on the facts, the simultaneous representation of multiple would-be partners or incorporators can give rise to an actual, likely, or unlikely conflict. See, e.g., OSB Legal Ethics Op No 1991-123; In re Samuels/Weiner, 296 Or 224, 674 P2d 1166 (1983).
The weight of Oregon authority strongly suggests that the court should hold that representation of an existing general or limited partnership or trade association is not, as a matter of law, representation of any of the partners or association members; rather it is representation of the entity as such. A similar entity theory would also apply to government clients (e.g., representation of the City as such should not be deemed representation of the mayor or of city employees). See, e.g., OSB Legal Ethics Op No 1991-122.
1.7:400 Conflict of Interest Between Current Client and Third-Party Payor
DR 5-108(A)(1) prohibits a lawyer from accepting compensation for legal services from a party other than the lawyer’s client, unless the lawyer first receives the client’s consent after full disclosure. See In re Benson, 12 DB Rptr 167 (1998) (attorney disciplined for giving advise to customers of living-trust company while being paid by company for his services and directed by company, without disclosure of potential adverse impact to his clients); In re Richards, 8 DB Rptr 71 (1994) (attorney disciplined for being paid and directed by person other than his client when client could not be located and therefore could not consent); see also OSB Legal Ethics Op No 1991-98 (attorney may ethically agree with insurer to handle cases for insurer at flat rate per case, so long as attorney does not permit existence of such fee agreement to limit work that attorney would otherwise do for particular client).
1.7:410 Insured-Insurer Conflicts [see 1.7:315 ]
1.7:420 Lawyer with Fiduciary Obligations to Third Person [see 1.13:520]
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1.7:500 Conflict of Interest Between Current Client and Lawyer's Interest [see also 1.8:210-:220]
DR 5-101(A)(1) prohibits a lawyer from accepting or continuing employment if the “exercise of the lawyer’s professional judgment on behalf of the lawyer’s client will be or reasonably may be affected by the lawyer’s own financial, business, property, or personal interests,” unless the lawyer’s client has consented after full disclosure. DR 5-101(A) also prohibits a lawyer from continuing to represent a client when the initial employment did not create a DR 5-101(A) conflict but changed circumstances caused such a conflict to arise at a later time. In re Moore, 299 Or 496, 507, 703 P2d 961 (1985); OSB Legal Ethics Op No 1991-32.
Because a lawyer is deemed to have the knowledge of all facts that the lawyer knew or in the exercise of reasonable care should have known, a lawyer can still be in violation of DR 5-101(A)(1) even if the lawyer is mistaken about or actually unaware of facts giving rise to the violation. In re Germundson, 301 Or 656, 724 P2d 793 (1986); In re Harrington, 301 Or 18, 32, 718 P2d 725 (1986).
DR 5-101(A)(1) can apply, even though the lawyer and the client have the same overriding interest in a matter, if the lawyer’s professional judgment “will be or reasonably may be” affected by the lawyer’s self-interest. On the other hand, the fact that interests of the lawyer and client appear to be the same in a matter, or that close factual searching does not reveal that the lawyer’s judgment would be impaired, may establish that the lawyer’s professional judgment is not likely to be affected by the lawyer’s self-interest. See In re Tonkon, 292 Or 660, 642 P2d 660 (1982); In re Samuels/Weiner, 296 Or 224, 674 P2d 1166 (1983).
The potentially small size of the lawyer’s financial, business, property, or other personal interest does not, in itself and as a matter of law, render DR 5-101(A)(1) inapplicable. However, the smaller the lawyer’s interest, the less likely it is that such interest would affect the exercise of the lawyer’s professional judgment. See In re Samuels/Weiner, 296 Or at 231.
Under DR 5-105(G), when a lawyer must decline employment due to DR 5-101(A)(1) (among other disciplinary rules), no other member of that lawyer’s law firm may accept or continue such employment except in certain representation of multiple clients.
DR 5-101(A)(1) conflicts most often arise in the context of loans from a client to a lawyer, from the client to persons with whom the lawyer has a personal relationship, and from the client to legal entities in which the lawyer has an interest. In re Griffith, 304 Or 575, 748 P2d 86 (1987); In re Harris, 304 Or 43, 741 P2d 890 (1987). Other examples of such DR 5-101(A)(1) conflicts include:
(2) the lawyer’s representation of a client in a property transaction in which the lawyer’s spouse was the real estate broker and stood to receive a commission on the sale, OSB Legal Ethics Op No 1991-94;
(4) the lawyer’s representing a client in the formation of a corporation and subsequently representing the corporation when the purpose of the corporation was to protect the interests of another corporation in which the lawyer owned stock, In re Griffith, 304 Or at 617-18; and
It is not an automatic DR 5-101(A)(1) conflict for a lawyer to represent a corporation while the lawyer serves as an officer, director, or shareholder of the corporation. However, in such a situation, a lawyer should continually review the legal matters the lawyer is working on for the corporation to ensure that the lawyer’s advice is not, or reasonably may not be, affected by the lawyer’s interest in the corporation.
(C) Personal Interests [see 1.8:210-:220]
Serving part-time as a pro tem judge or hearings officer, or in other similar capacities, does not trigger DR 5-101(A)(1). See, e.g., OSB Legal Ethics Op Nos 1991-102, 1991-39.
Pursuant to DR 5-108(C)(1), a lawyer who is a member of the board of directors or advisory committee of an Oregon legal aid program can represent a client in a proceeding in which the legal aid program represents the opposing party, if the lawyer and the lawyer’s law firm do not, or do not attempt to, influence the professional judgment of the legal aid attorneys; refrain from participating in any legal aid matters that might involve potential conflicts of interest; disclose to the client the lawyer’s relationship with the legal aid program; and obtain the client’s consent to continue representation. See also DR 5-108(C)(2) (permitting lawyer employed by Oregon legal aid program to represent client in similar proceeding under similar conditions).