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    Untangling Third-person Conflicts of Interest

    The decision as to whether the ethics rules bar representing potential clients whose interests might clash with those of a colleague requires predicting the likelihood of future conflicts.

    Dean R. Dietrich

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    tangled ethernet cablesQuestion

    A partner in my law firm serves on a local company’s board of directors. I have been contacted by a potential client who would like to bring a lawsuit against the company. May I represent the client in this matter?

    Answer

    This is one of the more sensitive areas of conflicts of interest that can arise during representation of a client. Conflicts are addressed in SCR 20:1.7. SCR 20:1.7(1)(a) provides as follows:

    “SCR 20:1.7 Conflicts of interest current clients.

    “(a) Except as provided in par. (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:

    “(1) the representation of one client will be directly adverse to another client; or

    “(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.”

    Under these provisions, a lawyer may have a conflict of interest that prevents representation of the new client if there is a significant risk that her representation of the new client would be materially limited by responsibilities the lawyer owes 1) to another client; 2) to a former client; 3) to a third person; or 4) because of the attorney’s personal interests. In this case, the company is not a client of the law firm so there is not a conflict of interest due to loyalties owed to a current client or a former client. Whether a conflict of interest arises from a material limitation of the lawyer’s interests because of responsibility to a third person or to the attorney herself is a much closer question.

    The lawyer must first determine whether her ability or interest in representing the client will be materially limited by her responsibilities to a third person, here the law firm member personally serving on the company’s board. The lawyer must determine whether or not the potential claim could result in an action against the law partner based on an allegation of intentional conduct. If such would be foreseeable, such a potential claim would clearly prevent the lawyer from representing the client if it meant bringing a lawsuit against a law partner. So the question is whether the lawyer thinks she cannot properly advocate for or represent the new client because of any limitations or inhibitions that would apply because her law partner is on the company’s board. This requires a consideration of where the lawyer’s loyalties would lie if the potential client’s matter were to proceed to a contentious litigation.

    The lawyer must also determine whether the representation of the new client would be materially limited by the lawyer’s personal interests if it were foreseeable that the representation of the client in a suit against the company would affect the law firm relationships and law firm atmosphere and result in negative effects on the lawyer and the work situation. Again, this requires the lawyer to seriously analyze whether she will be limited in her role of advocacy because of a personal interest that she may feel she must protect or make sure that it is not adversely affected by relationships with individuals in the law firm.

    It is hard to imagine that the lawyer would be comfortable representing a client in a lawsuit against a company on whose board one of the law firm’s partners sits. In many similar situations, the company is a client of the firm, which would eliminate the possibility of bringing suit against the company. When a lawyer in the law firm is a board member but the company is not a client of the firm, the analysis becomes more difficult and requires the lawyer seeking to represent the client to give serious consideration to any potential limitations on the lawyer’s willingness and desire to effectively advocate for the new client.

    Dean R. Dietrichcom ddietrich ruderware Dean R. Dietrich, Marquette 1977, of Ruder Ware, Wausau, is past chair of the State Bar Professional Ethics Committee.




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