Wisconsin Lawyer: Ethics: Violate Conflict of Interest Rules, Surrender Fees:

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    Ethics: Violate Conflict of Interest Rules, Surrender Fees

    A lawyer who concurrently represents clients with conflicting interests risks not only censure for the supreme court rule violation but also being required to disgorge fees earned from representing the affected clients.

    Dean R. Dietrich

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    Wisconsin LawyerWisconsin Lawyer
    Vol. 85, No. 7, July 2012

    Question

    What might happen if I represent two clients whose interests conflict?

    Answer

    Conflicts of interest are addressed by SCR 20:1.7 and SCR 20:1.9. Under these rules, a lawyer may not represent two current clients if there is a conflict of interest between the two clients. A conflict of interest is measured by the concept of adversity; the lawyer must determine whether the representation of one client is adverse to the interests of the other current client. Often, this analysis involves a determination of whether the lawyer is advocating a position (on behalf of one client) that will cause harm to the interest of the other current client.

    Return MoneyThe analysis is different if one of the clients is a former client – the lawyer must determine whether the representation of the current client is adverse to that of the former client in the same or a substantially related matter for which the lawyer provided services to the former client. This analysis requires the lawyer to determine whether a reasonable lawyer would have learned information in the representation of the former client that now can be used to the detriment of that former client in the representation of the new, current client.

    The analysis above is background for one answer to the question. A lawyer whose concurrent representation of two current clients could be to the detriment of one of the clients runs the risk that the client whose interests are adversely affected will file a grievance. The grievance will focus on the duty of loyalty required to each of the clients by SCR 20:1.7.

    Another facet of this situation that is not often considered is that the lawyer is breaching his fiduciary duty to both clients by representing their conflicting interests at the same time. This may be the basis for legal action by the client whose interests have been adversely affected as well as a potential disciplinary finding that the lawyer has breached his duty to that client. A remedy in this situation would be the disgorgement of the fees the lawyer earned during the representation. Thus, the lawyer is at risk, in a situation involving the concurrent representation of clients between whom a conflict of interest exists, of losing the fees the lawyer earned through that representation.

    A recent ruling from the U.S. Court of Appeals for the District of Columbia Circuit exemplifies this situation. In So v. Suchanek, Nos. 10-1071, 10-7087, 10-7113 (D.C. Cir. Jan. 20, 2012), the court found that the attorney, Leonard Suchanek, breached his fiduciary duty by representing simultaneously a number of clients when an objective lawyer would have concluded that the attorney could not provide competent and diligent representation to each of the clients. This represented a violation of Model Rule 1.7(b)(2), which is similar to the Wisconsin rule.

    Dean R. DietrichDean R. Dietrich, Marquette 1977, of Ruder Ware, Wausau, is past chair of the State Bar Professional Ethics Committee. He can be reached at ddietrich@ruderware.com.

    The court concluded that Suchanek must disgorge, at a minimum, a fee of $400,000 plus interest. The court remanded the case for further review of additional conflicts of interest and consideration of an additional remedy that "should account for the full extent of the conflicts found; the need to deter attorney misconduct; the single 'fundamental principal of equity... that fiduciaries should not profit from their disloyalty'; and the decreased value of the services provided to So resulting from Suchanek's rampant misconduct...."

    This case illustrates the risk that a lawyer faces of giving up earned fees and being subject to a disciplinary investigation by the Office of Lawyer Regulation if the lawyer does not take the time to determine whether a conflict of interest exists and whether the lawyer can "wholeheartedly and zealously" represent both clients in a pending matter. See Comment 7 to Model Rule 1.7.




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