Ethics Opinion 317
Repudiation of Conflict of Interest Waivers
If a client’s waiver of his lawyer’s conflict of interest has been relied upon by another client or the lawyer, the client’s subsequent change of heart will not restore those involved to the status quo ante. Preferably, the consequences of any change of heart should be addressed when the waiver is granted. Absent such agreement, the consequences largely depend on whether another party (i.e., another client or the lawyer) has relied detrimentally upon the waiver. The limited exception for certain conflicts arising in the midst of a matter may be available to permit continuing representation of both clients. If not, and if there has been detrimental reliance by another client or the lawyer, the lawyer ordinarily should continue representing the other client. Absent such reliance, the parties normally will be restored to the status quo and the lawyer should conduct the conflicts analysis that would have been required when the waiver was secured.
Applicable Rules
- Rule 1.7 (Conflict of Interest: General Rule)
- Rule 1.9 (Conflict of Interest: Former Client)
- Rule 1.16 (Declining or Terminating Representation)
Inquiry
The committee has been asked whether a client who waives a conflict of interest1 on the part of his lawyer may later repudiate that waiver and, if so, the consequences of such an action.2 The inquiring law firm, believing that with appropriate waivers, it could represent two bidders in a federal agency’s licensing auction,3 sought such waivers. Initially, Client A consented but Client B did not. “After considering this over the weekend,” however, Client B’s co-owner, who was a lawyer with experience practicing before the agency, agreed to “waive the conflict and if [the inquiring law firm] wants to represent [Client A] in the auction, it can do so without our objection.” The law firm thereupon commenced the representations. More than two months later, Client B purported to withdraw its consent, stating that its waiver had been “sent in the heat of the moment and does not represent [Client B’s] best interests.”
Discussion
Permitting clients to waive conflicts of interest on the part of their lawyers is an alternative to automatic disqualification that has been recognized for a century. See American Bar Association, Opinions on Professional Ethics 22 (1967) (text of Canon 6 of the Canons of Ethics, adopted in 1908). The District of Columbia Rules of Professional Conduct (“D.C. Rules” or “Rules”) prohibit a waiver that would let a lawyer4 take adverse positions (i.e., represent differing interests) in the same matter.5 D.C. Rule 1.7(a) & comments [1]-[6]. The Rules do permit, however, waivers of such other conflicts of interest as those in which a lawyer opposes her own client in a matter where that client is represented by a different law firm, see D.C. Rule 1.7(b)(1), and those in which a lawyer’s personal interests, or her responsibilities to another client, might affect adversely the representation, see D.C. Rule 1.7(b)(2)-(4).6 In some circumstances a waiver may be granted even before a conflict arises. D.C. Bar Ethics Op. 309 (2001). Finally, a conflict involving a former client, which arises only if the new matter is the same as or substantially related to the earlier one, also may be waived. D.C. Rule 1.9 & comment [3].
A waiver is sufficient if there has been “full disclosure of the existence and nature of the possible conflict and the possible consequences of [the] representation.” D.C. Rule 1.7(c). The client’s consent must be uncoerced and must follow “consultation”—which is “communication of information reasonably sufficient to permit the client to appreciate the significance of the matter in question.” See D.C. Rules, Terminology, ¶¶ [2] (defining “consent”), [3] (defining “consultation”). Moreover, “‘full disclosure’ includes a clear explanation of the differing interests involved . . . and the advantages of seeking independent legal advice. It also requires a detailed explanation of the risks and disadvantages . . . entailed in the [waiver].” In re James, 452 A.2d 163, 167 (D.C. 1982) (interpreting former D.C. Code of Professional Responsibility). In sum, “the Rules require that a client who is asked to waive an actual or potential conflict have an adequate appreciation of what protection she is giving up,” and more explanation may be required where the client is unsophisticated than otherwise. D.C. Ethics Op. 309 (2001).7
Given these restrictions and preconditions for conflict waivers, what happens when a client who has granted a waiver changes his mind? The problem, of course, is that the other clients involved, not to mention the lawyer, may have acted in good faith reliance upon the waiver. This is particularly likely if some time has elapsed between the grant of the waiver and its revocation. The short answer is that while nothing can prevent a waiving client from later changing its mind, such an action might not compel the lawyer to withdraw from representing the other affected client.
The issue is not addressed expressly by the D.C. Rules. Our Court of Appeals has said that a consent to dual representation, given when there were no actual or foreseen conflicts among the parties, may be subject to revocation when a conflict arises, Griva v. Davison, 637 A.2d 830, 846 (D.C. 1994), but has gone no farther than that. As outlined below, however, the issue has been addressed elsewhere—in the Restatement of the Law Governing Lawyers, the recent revision of the ABA Model Rules of Professional Conduct (“Model Rules”) and, at least obliquely, in reported decisions from several other jurisdictions.
Although a waiver can be viewed as a contract between lawyer and client, the fiduciary nature of their relationship counsels against treating the question merely as one of contract law. See Barr v. Day, 879 P.2d 912, 917-18 (Wash. 1994) (noting “special nature of the attorney-client relationship”); Restatement of the Law Governing Lawyers (“Restatement”), at p. 244 (2000) (“special relationship between lawyers and clients”). After all, a client can discharge his lawyer at any time, with or without cause, D.C. Rule 1.16(a)(3) & comment [4]; Tinney v. Duckett, 141 A.2d 192, 193 (D.C. 1958); Barr, 879 P. 2d at 917-18, and regardless of any contrary contract between them, Restatement (Second) of Agency, § 118 & comment b (1958); ABA Informal Op. 1397 (1977); Warren A. Seavey, Law of Agency 87 (1964) (citing Francis v. Bartlett, 121 So. 2d 18 (La. App. 1960)). The Restatement and the Model Rules would accord the client the same rights where revocation of waivers is concerned, at least absent special circumstances. Restatement § 122, comment f (positing an absolute right to revoke a waiver at any time); Model Rule 1.7, comment [21] (adopted Feb. 2002) (same); see Tinney, 141 A.2d at 193.
But while a client can discharge his lawyer at any time, he cannot thereby escape his existing obligations to her (e.g., payment for services rendered prior to discharge). See, e.g., D.C. Rule 1.16, comment [4].8 By the same token, a change of heart about a conflict waiver also may lead to adverse consequences for the repudiating client. See Crabtree v. Academy Life Ins. Co., 878 F. Supp. 727, 731 (E.D. Pa. 1995) (applying Pa. law); Restatement (Second) of Agency, § 118, comments b and c (1958).
The possibility of a change of heart, like other contingencies, typically can be addressed best by providing for it in advance. This can be done in the engagement letter, the communication in which the waiver is granted, or some other communication (preferably written9) between lawyer and client. Such an agreement can address whether a client that changes its mind will have a right to continued representation by the lawyer and, if the lawyer is permitted to withdraw from representation of that client, whether the lawyer may continue representing the other clients who are involved.
Absent advance arrangements, however, what consequences (if any) should ensue when a client changes its mind about a previously granted conflict waiver? Typically, neither the grant nor the effect of a conflict waiver is unilateral. Other clients and the lawyer may have been affected by the waiver and often will have acted in reliance upon it.
We disagree to some extent with the position of the Restatement. As noted above, the Restatement says that a waiver can be revoked at any time but that adverse consequences to the revoking client may ensue. Restatement § 122, comment f. The Restatement posits a two-step inquiry: First, is the revocation “justified,” for example by a material change in expectations between the time the waiver is granted and the time of revocation, disloyalty of the lawyer to the revoking client, or violation by the other client of a joint representation arrangement. Id. If revocation is justified, the lawyer must withdraw from representing the other client, in which case the second issue need not be addressed. Id. Second, if the revocation is unjustified, would “material detriment to the [non-revoking] client or lawyer . . . result” from the lawyer’s withdrawal? Id. (citing “reasonable expectations” of lawyer and non-revoking client). The Restatement’s examples of material detriment are situations where substantial time, money, and effort have been invested in the representation, where confidential information has been disclosed to the lawyer by the non-revoking client and a trusting relationship has developed between the two, and where the lawyer or non-revoking client has elected to forgo other opportunities in reliance upon the consent. Id.
We also disagree somewhat with the Model Rules, whose view is that (1) waivers always are revocable and (2) whether the lawyer can withdraw from representing the revoking client and continue representing the other client “depends on the circumstances, including the nature of the conflict, whether the client revoked consent because of a material change in circumstances, the reasonable expectations of the other client and whether material detriment to the other clients or the lawyer would result.” Model Rule 1.7, comment [21] (adopted Feb. 2002).
Relevant judicial decisions from other jurisdictions typically have arisen in the context of disqualification motions. In effect, a motion to disqualify a firm to whom the movant previously has granted a conflict waiver constitutes a client’s attempt to revoke the waiver. See Tinney, 141 A.2d at 193 (principal’s action inconsistent with agent’s authority revokes that authority). A 1995 California decision examined whether a firm that had jointly represented an individual and his employer in a matter, but had withdrawn from representing the employee when his dishonesty in the matter came to light, could pursue the employer’s ensuing fraud claim against the employee. Zador Corp., N.V. v. Kwan, 37 Cal. Rptr. 2d 754 (App. 1995). The Court of Appeal permitted the law firm to continue representing the employer because the former employee/client had stated, while a client and again at the time the firm withdrew from representing him, that he understood and agreed to the detailed waiver presented to him. Id. at 763-64. The court-in effect holding that the waiver bound the individual-let the representation of the employer continue because of the detailed nature of the waiver and the fact that it had been discussed repeatedly with the waiving employee. Id. at 763. The court also noted that more than three years had passed between the time the employee/client and the law firm parted company and the time he sought, in effect, to revoke his waiver by seeking the firm’s disqualification. Id. at 763-64. Prejudice due to delay not only is relevant but may justify denial of disqualification. Id. at 764; see Elliott v. McFarland Unified School Dist., 165 Cal. App. 3d 562 (App. 1985) (noting delay in bringing disqualification motion as partial grounds for its denial).10
A leading Ninth Circuit decision states expressly that revocation of consent does not preclude continuing representation of the other client where the law firm and other client had relied upon the waiver. Unified Sewerage Agency v. Jelco, Inc., 646 F.2d 1339, 1346 n. 6 (9th Cir. 1981); accord Fisons Corp. v. Atochem N. Am., Inc., 1990 WL 180551, *6 n. 6 (S.D.N.Y. 1990). Another decision, while not expressly mentioning reliance, rests heavily, in denying the disqualification motion, on the law firm’s long and continuous relationship with the non-revoking client and the revoking client’s knowledge of that relationship before engaging the law firm. Interstate Properties v. Pyramid Co. of Utica, 547 F. Supp. 178 (S.D.N.Y. 1982). Several decisions permitting continued representation of the other client have relied in part upon the fact that independent counsel for the waiving client reviewed the waiver when it was granted. Jelco, 646 F.2d at 1342-43; Fisons, 1990 WL 180551, at *1-*2.
As noted above, our Court of Appeals has hinted in dictum that a waiver may be revocable where circumstances have changed beyond the contemplation of the waiving client at the time the waiver was granted. Griva, 637 A.2d at 846. In that case, however, the client arguably had not waived a current or even a potential conflict. Rather, she was one of a three-person family partnership who had permitted the lawyer for the partnership also to represent the two other partners as individuals. Id. at 833-34. A conflict, indicated the court, was not within the contemplation of that waiver. Id. at 846. Moreover, even were the permission in that case deemed to be an advance conflict waiver, it’s unclear whether the court viewed the waiver as satisfying the disclosure, consultation and consent requirements of Rule 1.7(c).
We do not decide the somewhat metaphysical question of whether a conflict waiver is irrevocable or is revocable but with possible adverse consequences for the revoking client. What does require resolution here is this: When the waiving client’s change of heart is manifested to the lawyer, what rules govern whether the lawyer may (or, for that matter, must) withdraw from representing one or both of the clients whose adversity was the reason for the waiver?
Several provisions of D.C. Rule 1.16 appear potentially relevant. First, the change of heart properly might be construed, at least in some circumstances, as a discharge of the lawyer by the revoking client. See, e.g., Artromick Int’l, Inc. v. Drustar, Inc., 134 F.R.D. 226 (S.D. Ohio 1991) (client conduct inconsistent with attorney-client relationship constitutes discharge); Belli v. Shaw, 657 P.2d 315, 319 (Wash. 1983) (client’s action inconsistent with contract with lawyer constituted discharge of lawyer); see also Tinney, 141 A.2d at 193 (principal’s action inconsistent with agent’s authority revokes that authority); Maddox v. Burlingame, 517 N.W.2d 816, 818 (Mich. App. 1994) (engagement of replacement counsel “effectively terminates the attorney-client relationship”); Costello v. Bruskin, 395 N.Y.S.2d 116 (App. 1977) (commencement of malpractice action against lawyer constitutes notice of termination). A lawyer discharged by a client not only may, but must, withdraw. D.C. Rule 1.16(a)(3).
Even if the client’s action doesn’t constitute discharge of the lawyer by the revoking client, withdrawal is required where continuing the representation will result in a violation of the Rules. D.C. Rule 1.16(a)(1); Restatement § 32(2)(a) & comment f. Acting in an unwaived conflict situation will violate Rule 1.7 and hence requires withdrawal from at least one of the conflicting representations. Further, withdrawal is permissible if it will not have a “material adverse effect on the interests of the client.” D.C. Rule 1.16(b). Where, for example, the lawyer has no current projects for a client, there is a strong presumption that this criterion is satisfied, even if the client reasonably believes that it has a continuing attorney-client relationship with the lawyer. D.C. Ethics Op. 272 (1997).11
Third, withdrawal is permitted, even where prejudice to the client might result, where after reasonable warning, a “client fails substantially to fulfill an obligation to the lawyer regarding the lawyer’s services.” D.C. Rule 1.16(b)(3). Fourth, the lawyer may withdraw where “obdurate or vexatious conduct on the part of the client has rendered the representation unreasonably difficult.” D.C. Rule 1.16(b)(4); see Sobol v. District Court of Arapahoe County, 619 P.2d 765, 767-68 (Colo. 1980) (finding that “mutual antagonism . . . between lawyers and client was so intense that it rendered it unreasonably difficult for [lawyers] to carry out their employment effectively”); McGuire v. Wilson, 735 F. Supp. 83 (S.D.N.Y. 1990) (same). Finally, if the matter is before a tribunal, the tribunal might conclude that the lawyer has “other good cause” for withdrawal.12 D.C. Rule. 1.16(b)(5); see In re Admonition Issued in Panel File No. 94-24, 533 N.W.2d 852 (Minn. 1995) (lawyer reasonably believed that client lacked confidence in lawyer’s representation); In re Anonymous Member of the Bar, 379 S.E.2d 723 (S.C. 1989) (serious deterioration of attorney-client relationship, evidenced by client’s filing of grievance against lawyer); Kolomick v. Kolomick, 518 N.Y.S.2d 413 (App. 1987) (breakdown of attorney-client relationship).
What process should be followed, then, when a current client changes its mind about a previously granted waiver of his lawyer’s conflict of interest? First, the Rule on “thrust-upon” conflicts may permit the lawyer to continue both representations, but only if the revival of the conflict (1) was not reasonably foreseeable (which likely will be so where a waiver was granted)13 and (2) doesn’t involve a “punch pulling"14 situation. See D.C. Rule 1.7(d); D.C. Ethics Op. 292 (1999). If this option is unavailable, we see the applicable standard as one that blends the approaches of the Restatement, the Model Rules, and the Jelco decision, and that takes into account the permissibility, see D.C. Ethics Op. 309 (2001), of advance waivers of conflicts.
In the situation that occasioned this inquiry, the client who repudiated his waiver was a lawyer with experience practicing before the agency where the representations were pending. Hence we assume that the waiver satisfied the requirements of Rule 1.7(c).
The principal issue, then, is reliance. Some examples are offered by the Restatement-the investment of substantial time, money and effort in the representation of the other affected client, the disclosure of confidential information to the lawyer by the other client, the development of a relationship of trust between the lawyer and the other client, and the election of the lawyer or the other client to forgo other opportunities in reliance upon the consent. Restatement § 122, comment f. We note in respect of the last example that the lawyer’s acceptance of the client who later reconsiders its waiver effectively may have precluded the lawyer from accepting future representations of clients, or categories of clients, normally adverse to that client. This is because the waiver may permit such other representations in circumstances subject to Rule 1.7(b) but it won’t allow them in circumstances subject to Rule 1.7(a). In the case of an advance waiver, the lawyer’s acceptance of the waiving client and commencement of that representation ordinarily will be sufficient to constitute reliance. Similarly, the lawyer’s service to a waiving former client, see D.C. Rule 1.9 & comment [3], normally should constitute reliance sufficient to estop that party from changing its mind about its waiver.
If there has been detrimental reliance by the other client or the lawyer, the lawyer ordinarily should continue representing the other client. Whether the lawyer then may, or must, withdraw from representing the client that has changed its mind is governed by Rules 1.7, 1.9 and 1.16.15 As discussed above, possible bases for such a withdrawal may be that the repudiation of the waiver effectively has discharged the lawyer, see D.C. Rule 1.16(a)(3) (mandatory withdrawal), continuing both representations will cause the lawyer to violate the conflict of interests prohibition of the Rules, see D.C. Rules 1.7, 1.9; D.C. Rule 1.16(a)(1) (mandatory withdrawal), withdrawal can be accomplished without prejudice to the repudiating client (if that indeed is the case), see D.C. Rule 1.16(b) (permissive withdrawal); D.C. Ethics Op. 272 (1997) (same), the repudiation constitutes failure “to fulfill an obligation to the lawyer regarding the lawyer’s services,” D.C. Rule 1.16(b)(3) (same), “obdurate or vexatious conduct on the part of the client has rendered the representation unreasonably difficult,” D.C. Rule 1.16(b)(4) (same), and a tribunal has found “other good cause” for withdrawal, D.C. Rule 1.16(b)(5) (same). See generally Restatement § 132, comment j (permitting withdrawal where conflict arises due to action of client, rather than of lawyer). Of course, if the matter is a proceeding before a tribunal, consent of the tribunal may be a prerequisite for withdrawal. See D.C. Rule 1.16(c).16
If there has been no detrimental reliance by the other client or the lawyer, the lawyer and both clients in effect are restored to their positions immediately prior to the grant of the waiver. Given that the lawyer’s acceptance of, and beginning work for, the other client (and in many cases, the repudiating client as well) typically will constitute reliance, cases in this category presumably will be rare, particularly where more than a brief period has elapsed since the waiver was granted. Should such a situation nevertheless arise, the lawyer must perform the same analysis that would have been required had the waiver been refused initially. Assuming that withdrawal from representation of one client (or both, for that matter) is required, the most likely basis will be that continuing the representation will result in a violation of the Rules’ prohibition on conflicts of interest. See D.C. Rule 1.16(a)(1).
As in all matters involving client relationships, the lawyer should apply a measure of prudence to her actions. For example, that the Rules may permit a lawyer to continue the representation of both parties does not mean that the lawyer should do so if the interests of the parties or common sense dictate otherwise. If the lawyer does withdraw from one or both representations, she must protect her former clients’ interests, see D.C. Rule 1.16(d) & comment [10], and may not disclose or use the former clients’ secrets or confidences other than as prescribed by applicable law, see D.C. Rule 1.6.
Finally, we reiterate that an advance agreement can avoid many, if not most, uncertainties surrounding repudiation of a conflict waiver. Such an agreement could specify, for example, the effect of repudiation upon such aspects of the matter as the lawyer’s right to continue representing the other clients.17
Inquiry No. 01-6-14
Adopted: November 19, 2002
Published: November 2002
1. This opinion does not address waivers of confidentiality, other than to note that they cannot be implied from waivers of conflicts of interest. See D.C. Ethics Op. 309, at n. 10 (2001).
2. The inquiry initially was addressed by an informal letter to the inquirer from the Acting Chair of the committee. This opinion is consistent with that letter.
3. We have accepted for purposes of this opinion the inquiring firm’s assertion that the conflict was one under Rule 1.7(b) of the D.C. Rules of Professional Conduct and hence waivable. Were the situation one in which the same firm was representing the adverse interests of two clients in the same matter, the conflict would be one under Rule 1.7(a) and hence not waivable.
4. The disqualification of a single lawyer under Rule 1.7 is imputed to all the lawyers in that individual’s firm. D.C. Rule 1.10(a); D.C. Ethics Op. 279 (1998). “Firm” includes a private firm, “lawyers employed in the legal department of a corporation or other organization, and lawyers employed in a legal services organization.” D.C. Rules, Terminology, ¶ [4].
5. The Rules define “matter” broadly as “any . . . representation.” D.C. Rules, Terminology, ¶ [8].
6. Paragraphs (2) through (4) of Rule 1.7(b) sometimes are referred to as “punch-pulling” rules because they address the concern that a lawyer might “pull her punches” (i.e., be less assertive, zealous or diligent) on behalf of one client out of concern for the interests of some other client or of the lawyer herself.
7. Where the waiving client has other counsel (in-house or outside) available, there is a strong presumption that its conflicts waiver is informed and sufficient. See ABA Model Rule 1.0, comment [6] (adopted Feb. 2002). In some situations, this may counsel a lawyer requesting a waiver to suggest or recommend that her client engage in such consultation.
8. This is not to suggest, of course, that client cannot dispute the nature and extent, if any, of such obligations.
9. We recommend that conflict waivers, the consequences of a change of heart about such a waiver, and indeed, all the substantive elements of a lawyer’s engagement be in writing. See, e.g., D.C. Rule 1.7, comment [20] (recommending that conflict disclosures be written); D.C. Ethics Op. 248 n. 7 (1995) (encouraging that conflict waivers be in writing). Reducing the parties’ understandings to writing avoids the uncertainty inherent in relying upon individuals’ recollections—sometimes years after the fact—of what transpired in an oral exchange or whether such an exchange even occurred.
10. Zador properly is viewed as a case involving the waiver of a current, rather than a prospective, conflict. See D.C. Ethics Op. 309 n. 3 (2001).
11. Opinion 272 thus accords a narrow construction to the so-called hot potato doctrine. See D.C. Ethics Op. 272 (1997).
12. “If the matter is not pending in court, a lawyer will not have ’other good cause for withdrawal’ unless the lawyer is acting in good faith and the circumstances are exceptional enough to outweigh the material adverse effect on the interests of the client that withdrawal will cause.” D.C. Rule 1.16, comment [9].
13. We do not believe that providing in advance for the consequences of the client’s change of heart means that such an action was reasonably foreseeable, particularly where the lawyer routinely makes such provision in her engagement letters or otherwise.
14. See supra note 6.
15. This assumes that the safe harbor provision of Rule 1.7(d) is unavailable. If Rule 1.7(d) is available, the lawyer may continue representing both clients in their respective matters. As noted in footnote 13 above, the fact that the lawyer has made advance provision for the consequences of a change of heart does not mean that change was “reasonably foreseeable” within the meaning of Rule 1.7(d).
16. If the tribunal orders that representation of the repudiating client continue, the lawyer may be able to continue representing both clients, see D.C. Rule 1.16(c); In re Lathen, 654 P.2d 1110 (Ore. 1982) (finding violation of lawyer-witness rule but declining to impose discipline where trial judge ordered respondent to continue as defense counsel), but otherwise may be required to withdraw from representing the other affected client.
17. For example, an agreement could state as follows: “You have the right to repudiate this waiver should you later decide that it is no longer in your interest. Should the conflict addressed by the waiver be in existence or contemplated at that time, however, and should we or the other client(s) involved have acted in reliance on the waiver, we will have the right—and possibly the duty, under the applicable rules of professional conduct—to withdraw from representing you and (if permitted by such rules) to continue representing the other involved client(s) even though the other representation may be adverse to you.”
