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January 2002
Advance Waivers of Conflict
By Marcia L. Proctor
A lawyer is generally prohibited from concur- rently representing clients with conflicting interests. MRPC 1.7. In certain situations, however, a lawyer may undertake representation of a client whose interests conflict with another current client if both clients consent after consultation.
It is sometimes difficult to identify all of the potential conflicts of interest that may arise out of a particular representation. To meet the requirement of “consent”, some law firms propose to prospective clients at the outset of the representation that in the event a conflict arises between the prospective client and the firm’s current client, the prospective client agrees to waive any conflict and the law firm may continue to represent the interests of the current client, even if the law firm is required to withdraw from representation of the prospective client.
These “advance” or “blanket” waivers of potential conflicts of interest are subject to challenge on the ground that the client could not have given “informed” consent if the conflict was not specifically described and its effect on the client’s interests analyzed.
ABA Op 93-372 concludes that an advance waiver is not per se improper, but the client cannot appreciate the consequences of providing consent unless potential conflicting parties are identified, the class of potentially conflicting clients, or the nature of a potentially conflicting matter.
In two recent cases courts determined that the advance waivers used by law firms were inadequate to constitute the client’s “consent,” and the firms were disqualified.
In WORLDSPAN LP v Sabre Group Holdings Inc., 1998 WL 217947 (ND Ga), plaintiffs hiring tax counsel in 1992 gave consent prospectively to future directly adverse concurrent representation. The law firm employed a standard engagement letter that included the following language:
As we have discussed, because of the relatively large size of our firm and our representation of many other client, it is possible that there may arise in the future a dispute between another client and WORLDSPAN, or a transaction in which WORLD- SPAN’s interests do not coincide with those of another client.
In order to distinguish those instances in which WORLDSPAN consents to our representing such other clients from those instances in which such consent is not given, you have agreed, as a condition to our undertaking this engagement, that during the period of this engagement we will not be precluded from representing clients who may have interests adverse to WORLDSPAN so long as (1) such adverse matter is not substantially related to our work for WORLDSPAN, and (2) our representation of the other client does not involve the use, to the disadvantage of WORLDSPAN, of confidential information of WORLDSPAN we have obtained as a result of representing WORLDSPAN.
We have advised you that we have served as special counsel to Delta Air Lines for certain types of matters, including state and local tax matters. We do not view our work for Delta to be in conflict with our representation of WORLDSPAN, and Delta… has consented to our representation of WORLDSPAN. We have also advised you that we have represented American Airlines. We do not view our work for American Airlines to be in conflict with our representation of WORLDSPAN. We have represented various other airlines from time to time on limited matters… we do not view our representation of any of these carriers to be in conflict with our proposed representation of WORLDSPAN.
In 1998 the law firm was still representing WORLDSPAN in tax matters and various airlines, including American Airlines on other matters. WORLDSPAN sued Sabre Group. When the law firm filed an appearance for defendants in the current litigation, WORLDSPAN moved to disqualify defense counsel.
The law firm sought to explain its actions on several grounds. First, it believed it had put WORLDSPAN on notice, because the engagement letter explicitly named American Airlines as a current client. American Airlines is a subsidiary of AMR, and AMR owns 80% owned of Sabre Group, the current defendant. Second, the law firm sought to remove the conflict by withdrawing from the tax representation of WORLDSPAN.
The court found the language in the engagement letter to be ambiguous and inadequate notice of directly adverse litigation, since parties were not named, circumstances were not supplied, etc. It reiterated the lawyer’s duty to insure that each client has all the necessary information to make consent truly informed.
The court also noted that the current representation was not for a client that law firm had in 1992, but was undertaken for this particular case. It is also significant that the engagement letter purported, by client agreement, to change the standard applicable for ethical representation in conflict situations. The “substantially related” test suggested in the engagement letter is applicable only for former clients, not current clients under ethics Rule 1.7; use of confidential information to the disadvantage of WORLDSPAN is narrower than required in ethics Rule 1.6. As to the argument that any conflict was removed by the law firm’s withdrawal from WORLDSPAN’s tax representation, the court stated:
[To weaken the requirement of informed consent so that general letters of standing consent, that is, waivers of professional obligations as set forth in the applicable codes of professional responsibility, suffice would, in this Court’s opinion, drastically denigrate the lawyer’s unique position of trust with his client and go far towards permitting the relationship to depend merely upon the non-appearance of a more substantial client... [A]bsent informed consent, a conflict situation cannot be resolved after the conflicted representation has occurred by the law firm’s withdrawal from the least desired representation. 5 F Supp 2d 1356, 1360.
Another court held that “knowing” prospective consent to future conflicts is not impossible, but must be “exceedingly explicit.” In Florida Ins Guaranty Assn Inc v Carey Canada, 749 F Supp 255 (SD Fla 1990), plaintiff argued that the defendant’s law firm concurrently represented it and defendant when their interests were adverse. The firm disclosed its conflicting representation in a letter to the insurer’s claim adjuster as follows:
[A]s FIGA is aware, our firm has and continues to represent FIGA in several matters, while at the same time we represent other clients with interests adverse to FIGA in unrelated matters. In an abundance of caution, I wanted to let FIGA know that I am becoming involved in the question of potential claims by our clients (Jim Walter Corporation and its subsidiaries) that are arising out of several excess level liability insurers going into receivership. This is a matter that has already been with the firm for some time and obviously does not relate to the work I am doing for FIGA in any way. Presently, [that work] is only an appeal, but it has always been automobile cases. However, consistent with our relationship with FIGA and its standing consent in such matters I wanted to bring this particular situation to your attention.
The law firm argued that it had “standing consent” to represent clients with interests adverse to plaintiff as long as the matters were unrelated to the matters the law firm handled for plaintiff. It could not produce any document or testimony pinpointing who would have given such consent, when, or under what conditions. The letter to the adjuster was never answered.
The court found that the disclosure, sent to the adjuster and not management or counsel, was not adequate to put FIGA on notice. Further, the language was included as an afterthought in a letter about an unrelated FIGA matter. Third, the letter does not disclose the magnitude of the interests, “namely, 80,000 bodily injury claims and the numerous property damage claims totalling some $95,000,000.” The court found the letter to be inadequate consultation for ethical compliance. The court did not accept that a standing consent had been given, but noted nevertheless:
This manner of consent is too rarefied, too con- tingent, and too solicitous of FIGA’s non-lawyer employees to rise to the level of a proper standing consent. Inherent in this proposed system of consent is the lack of informed consultation. The duties of identifying the conflict of interest and obtaining the client’s consent to adverse representation belong solely to counsel and cannot be relegated to the client and its employees by providing less than full disclosure.
Michigan Ethics Opinion RI-183 also addresses advance waivers of conflicts. In that opinion prosecutors serving as legal advisors to the Department of Social Services [DSS] in child neglect matters wanted to use an agreement, under which DSS would consent in advance to any conflicts arising between the prosecutor’s duties to DSS and the prosecutor’s duties as prosecutor. The opinion noted:
This plan does not adequately satisfy the prosecutor’s ethical duties under MRPC 1.7. First, DSS cannot receive adequate counsel regarding whether to waive a conflict and give consent, if the situation in which the conflict arises has not yet occurred; a blanket consent before a particular conflict has arisen is not adequate under MRPC 1.7(a)(2) or 1.7 (b)(2). Second, as discussed earlier, there are some conflicts which client consent cannot vitiate. Third, it appears that the prosecutor would withdraw only after a determination that a dispute with the prosecutor’s advice has arisen. If DSS confidences and secrets have already been shared with the prosecutor regarding the matter, the prosecutor might also be disqualified from performing prosecutorial duties related to the matter. That cannot be determined in advance of a particular situation arising. Finally, the plan infers that the prosecutor’s duties to the government entity will always prevail over the lawyer’s DSS responsibilities. A prosecutor may have a preference for performing prosecutorial duties rather than DSS services; when a prosecutor undertakes to provide legal services in a particular DSS matter, the prosecutor has two clients owed the same ethical duties of loyalty, competence and diligence, etc.
Conclusion
Because advance waivers are disfavored and closely scrutinized, care should be taken to put the waiver in writing, to articulate the potential conflicts with specificity (naming clients and types of matters), to track the language of ethics rules regarding the ability to continue representation, and to obtain the client’s written consent.
The duration of any agreement for advance waiver should not be indefinite, but agreements may be renewed or renegotiated on a periodic basis, preferably annually.
Marcia L. Proctor is General Counsel at Butzel Long, a multi-state law practice based in Detroit, Michigan, and concentrates her practice in professional responsibility and risk management. Butzel Long serves as panel counsel and loss prevention counsel for DPIC. This article presents the personal views of Ms. Proctor and should not be at- tributed to Butzel Long or DPIC.
Disclaimer: “Perspectives” is published as a service to lawyers. While the information contained herein is believed to be reliable, readers are advised to consult their own legal and insurance counsel for assistance in applying it to their unique situations.