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 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.
Wisconsin
Lawyer