UNITED STATES

It has been suggested that the recent increased interest in conflicts in the United Kingdom has been prompted by the growing presence in Europe of United States law firms and companies.^[273] As the Americans expand their presence in Europe, they bring with them their own approach to conflicts.

The American Bar Association (ABA) was established more than 80 years ago to provide ‘leadership in legal ethics and professional responsibility through the adoption of professional standards which serve as models of the regulatory law governing the legal profession’.¹⁸ The ABA recommends rules for adoption by State bar associations across North America.¹⁹ In 1995 it found that conflicts of interest caused such problems for lawyers and their clients that it decided to set up a ‘Task Force’ to examine ‘the most troublesome conflicts in today’s law practice and suggest one or more written agreements to be signed by lawyers and their clients to resolve... issues before they arise.’²⁰

Conflicts of interest are addressed by the ABA in their model rules under ‘client-lawyer relationships’.²¹ Rule 1.7 sets out the general rule on conflicts, defining a conflict of interest as either (a) representing a client with ‘directly adverse’ interests or (b) having interests or responsibilities which would limit the lawyer from doing the best for his client.²² In either case a lawyer is prohib­ited from representing the client.

There is, however, an important difference between the rules of the Law Society and those of the ABA. In the United States, rule 1.7 allows clients to

914 (US Dist Ct, ED Va, 1981); Nemours Foundation v Gilbane, Aetna, Federal Ins Co, 632 F Supp 418 (USCA, D Del, 1986); USA for the Use and Benefit of Lord Eletric Co v Titan Pacific Construction Corp, 637 F Supp 1556 (US Dist Ct, WD Wash, 1986).

¹⁶ M Chambers, ‘Conflicts as Weapons’, (1994) 17 National Law Journal: ‘A trend that seems to be emerging... is the apparent purposeful manipulation of the conflicts issue in order to keep a law firm from representing a specific client. A large corporation may spread insignificant business to law firms all over the town, knowing that at some point a case will come up that will conflict them all out.’ See also KD Spickelmier and K Kattner, ‘Client, Attorney Mobility Creates Growing Conflict of Interest Concerns’, Texas Bar Journal, April 1990, p 406 and V Slind-Flor, ‘Client-Conflicts Patrols March On’, The National Law Journal, 30 March 1992, p 1.

¹⁷ M Chambers, n 16 above: ‘The ALAS pay out so much money in compensation that they have compiled a detailed compendium which sets out conflict liabilities and advises lawyers on best prac­tice.’

¹⁸ AH Garwin (ed), ABA Compendium of Professional Responsibility Rules and Standards (American Bar Association, Chicago, 1999) at 7.

¹⁹ At the time that the 1999 edition of the Model Rules went to press, more than two-thirds of the jurisdictions in America had adopted new professional standards based on the Model Rules. Ibid, p 8.

²⁰ See American Bar Association, Editorial, ‘The Business Lawyer: A Bulletin of the Section on Corporation and Mercantile Law’, (1995) 1381/50 n 4.

²¹ The US case law will not be examined in this chapter. For further reference see JR Midgley, ‘Confidentiality, Conflicts of Interest and Chinese Walls’, (1992) 55 Modern Law Review 822.

²² Rule 1.7, ABA Model Rules of Professional Conduct, op. cit., p 31. Garwin (ed), ABA Compendium of Professional Responsibility Rules and Standards (American Bar Association, Chicago, 1999) at 7. consent to the lawyer acting in a conflict if ‘the lawyer reasonably believes the representation will not adversely affect the relationship or [his] relationship with the other client.’^[276] Moreover, in the accompanying commentary to this rule, note 3 states that ‘simultaneous representation in unrelated matters of clients whose interests are only generally adverse, such as competing economic enterprises, does not require consent of the respective clients.’^[277] Therefore, to take an extreme example, if Firm XYZ represented the Coca-Cola Company and were asked to act for Pepsi, although the two clients had competing com­mercial interests, there would be nothing to prevent the firm from acting for both companies provided the advice sought was not in respect of an issue in which the two companies were directly competing.

In this respect the ABA rules reflect the common law position in England and Wales, in that a client can waive the fiduciary duties owed to him.^[278] The US rules are thus less strict than the rules adopted by the Law Society. It has been suggested, however, that a rule allowing clients to give such consent is ‘funda­mentally flawed’.^[279] The arguments against rule 1.7 appear to be four-fold:^[280]

1. The rule seems to focus entirely on the lawyer-client relationship and, there­fore, the only issue the lawyer must consider is whether the representation of one client will adversely affect the relationship with the other client. The lawyer is not required to consider whether, from the client’s perspective, it is wise to give such consent.

2. Where the lawyer’s involvement is limited by his obligations to other clients, the only issue the lawyer must consider is whether the ‘representation will be adversely affected’. Such ‘representation’ includes limitations to which the lawyer and client may already have agreed under the terms of the retainer. The rule does not, therefore, prohibit an agreement under which the lawyer is precluded from doing his best for the client.

3. Although the rule does not require the lawyer to explain the implications and risks of giving such consent, it does require [him] to explain the potential costs of dual representation to the client. It also requires the lawyer to iden­tify the advantages of common representation.

4. A single rule cannot adequately embody the separate interests of clients, lawyers and the legal system as a whole.

A further issue, which has not been specifically identified by commentators, is that no recommendations are made as to how best to protect the interests of two clients where a firm is representing both in the same matter. No guidance is given, for example, on the desirability of establishing separate teams of fee­earners. Therefore, where the clients concerned are on the same side in a joint action, but where their interests are nonetheless potentially at odds, a lawyer or firm may represent these two or more clients without taking any protective measures, provided that both clients give their consent to such action.^[281]

The attitude of the ABA to other types of conflict is not as straightforward. In general a much stricter approach has been adopted. This can be seen, for exam­ple, in relation to lawyers who practise in association with other lawyers. Rule 1.10 states that ‘none of them shall knowingly represent a client when any one of them practising alone would be prohibited from doing so by the [rules].’ The use of the word ‘knowingly’ here suggests that a lawyer would have to be aware of the work his colleague was doing in order to fall foul of this rule.

the rule of imputed disqualification stated in [the rule] gives effect to the principle of loyalty to the client as it applies to lawyers who practise in a law firm. Such situations can be considered from the premise that a firm of lawyers is essentially one lawyer for the purposes of the rules governing loyalty to the client, or from the premise that each lawyer is vicariously bound by the obligation of loyalty owed by each lawyer with whom the lawyer is associated.

It would seem, therefore, that lawyers practising in a large firm are imputed with the knowledge of each of their colleagues.

The rule on acting against former clients is equally strict. It prevents a lawyer from acting against a former client in the same or in a substantially related mat­ter in which a current client’s interests are opposed to the interests of the former client.^[282] Moreover, if a lawyer moves to a new firm and the firm he joins is act­ing against one of his former clients, that firm must cease to act in the matter. No provision is made to permit the new firm to screen the lawyer by means of a Chinese wall unless the lawyer was previously employed as a public officer or public employee.^[283] This is the case even though the ABA recognises the difficul­ties presented by such a rule:^[284]

There are several competing considerations. First, the client previously represented by the former firm must be reasonably assured that the principle of loyalty to the client is not compromised. Second, the rule should not be so broadly cast as to preclude other persons from having reasonable choice of legal counsel. Third, the rule should not unreasonably hamper lawyers from forming new associations and taking on new clients after having left a previous association. In this connection, it should be recog­nised that today many lawyers practise in firms, that many lawyers to some degree limit their practice to one field or another, and that many move from one association to another several times in their careers.

Although the transferring lawyer has to be shown to have some knowledge of the affairs of the former client,^[285] if he or she has acquired relevant information, then his new firm is excluded from acting against that client.^[286] It would seem that the ABA’s primary concern with respect to successive representation con­flicts is to ensure that the lawyer’s duty of confidentiality to the original client is not compromised.