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    Ethics: Rescinding Waivers of Conflict

    Ethics rules provide little guidance when a client wishes to rescind a waiver of a conflict of interest. Avoid that situation by taking extra time during the initial discussion to help clients clearly understand the consequences of consenting to a waiver of a conflict of interest.

    Dean Dietrich

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    Wisconsin Lawyer
    Vol. 76, No. 8, August 2003

    Rescinding Waivers of Conflict
    Fully Explain Waivers of Conflict of Interest

    Ethics rules provide little guidance when a client wishes to rescind a waiver of a conflict of interest. Avoid that situation by taking extra time during the initial discussion to help clients clearly understand the consequences of consenting to a waiver of a conflict of interest.

    by Dean R. Dietrich

    Dean DietrichDean R. Dietrich, Marquette 1977, of Ruder, Ware & Michler L.L.S.C., Wausau, is chair of the State Bar Professional Ethics Committee.

    Question

    Recently I received a waiver of conflict from one of my clients to allow me to represent another client in a transaction. The client that gave the waiver now wishes to withdraw the waiver and challenge my representation of the other client. Can I continue to represent the other client in the transaction?

    Answer

    There is very little guidance in the ethics rules on the question of withdrawal or repudiation of a previously granted waiver of a conflict of interest. Some would argue that a waiver of a conflict of interest is solely at the discretion of the client, and therefore the client can revoke that waiver at any time. Others would argue that once the waiver of the conflict has been given, the lawyer has taken steps to represent the other client and should not be precluded from continuing that representation. A recent ethics opinion offers some guidance to lawyers but does not provide a definitive answer to whether a client can cancel a waiver of a conflict of interest.

    Wisconsin SCR 20:1.7 allows a lawyer to represent one client if there is a conflict with another client if both clients provide a written consent to a waiver of the conflict of interest. This rule specifically requires that the client's waiver of the conflict of interest must be given in writing after consultation. This means that the lawyer must fully explain the reasons for and effect of the waiver of the conflict of interest and then obtain the client's written consent to waive the conflict of interest, which then allows the lawyer to represent another client in a matter that may be adverse to the first client. It is generally recommended that the client giving the waiver sign a document indicating that the client understands the effect of the waiver and consents to the waiver. There is no guidance or reference in SCR 20:1.7 to a cancellation or repudiation of a written consent to a waiver of a conflict.

    District of Columbia ethics committee opinion. In a recent District of Columbia Bar Opinion, it is suggested that a lawyer need not stop representing a client simply because another client seeks to withdraw or repudiate a waiver of a conflict if the lawyer or the other client has relied upon the waiver given by the first client and would suffer adverse consequences if the waiver is withdrawn. Speaking to the concept of detrimental reliance, the D.C. Bar Ethics Committee in Ethics Opinion 317 wrote:

    "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. 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). ... 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). (Footnotes omitted.)"

    The detrimental reliance theory. Under the detrimental reliance theory, the lawyer must determine whether the new client or the lawyer will be adversely affected by the first client's request to withdraw the consent and prohibit the lawyer from representing the new client. This factual question must be decided on a case-by-case basis. If the lawyer concludes that neither the lawyer nor the new client will suffer adverse consequences if the waiver is withdrawn, then the lawyer must revert to the original analysis that was made as to whether a conflict exists in representing the first client and the new client. If the lawyer concludes that a conflict of interest exists, the lawyer is precluded from representing the new client. Conversely, if the lawyer concludes that the new client or the lawyer will suffer adverse effects if the representation is not allowed to continue, the lawyer may continue to represent the new client even though the first client wishes to withdraw the consent for waiver that allowed the new representation to occur. The lawyer, of course, must withdraw from representing the first client if involved in active representation of the new client.

    Conclusion

    The best practice is for lawyers to address the issue of withdrawal of consent to a waiver in the original discussions and agreement over the waiver of a conflict. This can be addressed by clearly providing that the first client may not withdraw or repudiate the waiver or, alternatively, identifying a stage in the proceeding when the first client must notify the lawyer and the new client of a desire to repudiate the waiver and upon failure to give such notice, the waiver is considered permanent. Lawyers are cautioned to spend the time necessary so clients clearly understand the consequences of consenting to a waiver of a conflict of interest and thereby, hopefully, avoid any attempt by a client to repudiate a waiver that has been given.




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