Multiple party representation and the new conflict rules: What you need to know

Issue January/February 2017 By Christa A. Arcos

Effective July 1, 2015, the Supreme Judicial Court adopted comprehensive amendments to the Massachusetts Rules of Professional Conduct (MRPC). Among the most significant changes is the new definition of "informed consent" and the requirement that a client's informed consent to conflicts and potential conflicts be confirmed with a writing. This new requirement of a writing applies whenever an attorney represents two or more clients, commonly referred to as multiple party or common representation. Examples of common representation include preparing an estate plan for a husband and a wife, representing co-defendants in civil litigation, and representing both a buyer and a lender in a real estate closing transaction. In all of these situations, Rule 1.7 of the MRPC now requires that each client's informed consent to the potential conflicts inherent in the common representation be confirmed in writing. The ethics rules continue to discourage common representation in a criminal context given the high likelihood that an actual conflict will materialize.

Obtaining a client's informed consent under the definition that became effective July 1, 2015, requires the attorney to engage in a detailed discussion with each client to explain the material risks inherent in the common representation and the reasonable alternatives. A writing that confirms a general waiver will not suffice under this new standard. If the consent given is either general or open-ended, it is unlikely that the client understood the material risks. Likewise, a writing that does not confirm a detailed conversation with each client may be ineffective even if that writing is signed by the client. The writing is not a substitute for discussing with the client the circumstances particular to that case and the potential conflicts to which the client is consenting in that situation. The purpose of the writing is to impress upon the client the importance of the consent that was discussed and to avoid later disputes or ambiguities. Although technical compliance with this provision of Rule 1.7 can be achieved with a writing that the lawyer transmits promptly following a conversation with the client, the best practice is to have the client execute the writing after the client has had a reasonable opportunity to consider the risks and alternatives that were discussed. Having the client execute a writing which confirms a conference with the attorney, will minimize the likelihood of credible confusion at a later date.

The effectiveness of a potential conflict waiver will be judged by whether, and to what extent, the client reasonably understood the material risks that the waiver entailed. The comments to rule 1.7 point out that "[t]he more comprehensive the explanation of the types of future representations that might arise and the actual and reasonably foreseeable adverse consequences of those representations, the greater the likelihood that the client will have the requisite understanding." Where a client is a sophisticated consumer of legal services and is reasonably informed regarding the risks, a waiver is more likely to be enforceable. Similarly, clients who are represented by independent counsel when weighing the considerations involved will possess a more comprehensive understanding of the risks and benefits particular to the common representation being proposed.

Although waivers will necessarily need to be tailored to the subject matter and circumstances of the particular representation, there are certain reasonably foreseeable consequences inherent in all common representation that must be discussed and confirmed in every written waiver. For example, the possibility that an actual conflict will arise in the future that requires the attorney to withdraw from representing one or more clients, must be disclosed and discussed. Such an event would require each client to incur the additional expense of hiring separate counsel, and may also result in delays that could carry financial or other consequences. Benefits inherent in all common representation will invariably include eliminating duplication of effort and expense. In addition, there are situations where a united effort is far stronger and more likely to be effective than individual efforts.

There are also responsibilities inherent to all common representation that must be disclosed and discussed. The client bears a greater burden for decision-making in a common representation situation. If a disagreement arises among the clients concerning the strategy to be implemented or whether they should accept a settlement, the attorney cannot advocate for one client to the exclusion of the position taken by the other client. Such disagreements would need to be resolved by the clients without the attorney's assistance or with the assistance of independent counsel hired at each client's own expense. In certain situations, the risk of adversity is so great that common representation should not be undertaken. If contentious litigation or negotiations are likely, the clients should be encouraged to hire separate counsel rather than consent to common representation. Among the relevant factors for consideration are whether the representation involves creating or terminating a business or commercial relationship, and the existence of any current or prior discord between the clients. Other relevant factors include whether it is likely that there will be a discrepancy in the clients' testimony, an incompatibility in their positions or a possibility of different settlements being offered to each client. The attorney should also examine his or her relationship to the clients. If the attorney has a pre-existing relationship with any of the clients or the attorney will represent one or more of the clients on a continuing basis in the future, those circumstances may make it difficult for the attorney to maintain impartiality and common representation may not be advisable.

Paramount to any discussion regarding informed consent to common representation is the impact that common representation will have on confidential and privileged information. Clients must understand that although all information discussed with the attorney will remain privileged and confidential as to third parties, there is no confidential or privileged information between the clients being commonly represented. If one of the clients shares information that is material to the representation and asks the attorney to keep it secret from the other clients, the attorney cannot comply with that request. The information will necessarily be disclosed to the other clients. Further, the request by one client that material information not be shared with the other clients could be an event that requires the attorney to withdraw from representing all clients. Clients should also understand at the outset that if they are not aligned in the future and they litigate against each other, none of their communications with the attorney are protected as privileged or confidential.

Often in a common representation situation the responsibility for payment of the fees and expenses will be borne disproportionately by the clients. Assuming the arrangement will not materially limit the attorney's representation of all clients, each client can give informed consent to such an arrangement. Irrespective of how the obligations to pay the attorney's fee are apportioned among them, a delinquency has the potential to create adversity that may impact the attorney's ability to provide continuing representation. For example, where a bill becomes delinquent it may give rise to the attorney's motion to withdraw on behalf of all clients even though the delinquency may have been created by only one of the clients failing to pay his or her share of the ongoing fees and expenses being incurred. This potential conflict should be discussed with each client at the outset and confirmed in writing.

In some common representation situations, the ethics rules may require a further writing signed by the client after the initial engagement. The settlement phase of a dispute or litigation is such an example. Under the new rules, aggregate settlements for multiple clients now require informed consent signed by the clients where the prior rules permitted oral consent. Before a settlement offer is made or accepted, an attorney must speak with each client to inform each of the material terms of the settlement. Those conversations must necessarily include an explanation concerning what each client will pay or receive as a result of the settlement. A subsequent writing confirming those conversations must be signed by each client.

Both the attorney and the clients benefit from identifying potential conflicts and engaging in a complete and candid discussion, as well as remembering that not every potential conflict is waivable. Multiple party representation can be very advantageous to clients given both the economic efficiencies and the strength in presenting a united front. However, if attorneys fail to appreciate potential conflicts at the outset, or to identify potential conflicts during the representation which require the clients to consult with independent counsel, they could fail to achieve their clients' joint objectives. By comparison, anticipating and discussing potential conflicts can often eliminate actual conflicts from materializing. Being forced to withdraw as counsel for one or more of the clients during the representation is likely to significantly increase the costs for all clients and will inevitably leave an attorney with unhappy clients. Either of these undesirable results can lead to bar counsel complaints, or an attorney being in the unenviable position of defending a legal malpractice claim. It is advisable that attorneys review their practices and procedures and establish protocols in multiple party representation to ensure compliance with the new ethics rules. The mandated potential conflict waivers are fact-intensive and there is no standard waiver that can be reliably used in all cases. However, the author is providing sample potential conflict letters for common representation situations on My Bar Access.

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