NYCLA COMMITTEE ON PROFESSIONAL ETHICS FORMAL OPINION
ADVANCE WAIVERS OF CONFLICTS OF INTEREST
LAWYER MAY ETHICALLY SEEK PROSPECTIVE WAIVER OF POTENTIAL FUTURE CONFLICT, PROVIDED CONFLICT IS WAIVEABLE; IF ACTUAL CONFLICT DEVELOPS, ENFORCEABILITY OF WAIVER WILL DEPEND ON WHETHER SUBSEQUENT REPRESENTATION WAS REASONABLY CONTEMPLATED.
DR 5-105(A)-(C); DR 4-101; EC 5-16, 5-19
Is it ethical for a lawyer to seek from an existing or prospective client a waiver of conflicts of interest that may arise in the future?
DR 5-105 of the Lawyer’s Code of Professional Responsibility (the “Code”) prohibits a lawyer from accepting proffered employment or continuing multiple employment “if the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by” the lawyer’s representation of another client, or “if it would be likely to involve the lawyer in representing differing interests.” The Code broadly defines “differing interests” as “every interest that will adversely affect either the judgment or the loyalty of a lawyer to a client, whether it be a conflicting, inconsistent, diverse or other interest.” Definition 1. The Code seeks through this rule to protect the client against conflicts of interest that could undermine the fiduciary nature of the attorney-client relationship and the lawyer’s attendant duty of loyalty. However, in recognition of the very important right of a client to retain counsel of his or her choice, and perhaps in recognition of the realities of modern legal practice, the Code provides that such conflicts can be waived with full disclosure and client consent. DR 5-105(C).
DR 5-105(C) allows a lawyer to represent multiple clients with conflicting interests “if it is obvious that the lawyer can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of the lawyer’s independent professional judgment on behalf of each.” This provision allows clients or prospective clients to waive their right to a conflict-free relationship with their lawyer if they so choose and to consent to their lawyer’s representation of another party or parties with interests adverse or differing from their own.
Does the exception of DR 5-105(C) apply, however, when a client or prospective client is asked to consent to a future conflict, the precise facts of which have yet to reveal themselves? The language of DR 5-105(C) does not specifically contemplate consent to a future conflict with a not-yet-existing “other” client. In fact, the subsection contemplates that there are two existing clients (or an existing client and a prospective client) whose interests must first be assessed by the lawyer to determine whether the lawyer “can adequately represent the interest of each” before seeking the consent of “each” after full disclosure of the possible impacts of such representation on “each” of them. But DR 5- 105(C) does not expressly prohibit a client or prospective client from consenting in advance to waive conflicts that may arise in the future. It is this Committee’s opinion that it is not unethical for a lawyer to seek a waiver of a conflict of interest that may arise in the future.
The mere fact that a waiver has been obtained will not, however, be dispositive as to the validity of the waiver itself. As noted by the American Bar Association in a recent opinion addressing prospective waivers,
a lawyer may ask for, and a client may give, a waiver of objection to a possible future representation presenting a conflict of interest that in the absence of a waiver the lawyer would be disqualified from undertaking. However, such a waiver must meet all the requirements of awaiver of a contemporaneous conflict of interest, and if the waiver is to be effective with respect to a future conflict, it must contemplate that particular conflict with sufficient clarity so the client’s consent can reasonably be viewed as having been fully informed when it was given.
–ABA 372 (1993).
The validity of an advance waiver will turn on whether the elements of DR 5-105(C) for contemporaneous waivers have been met. DR 5-105(C) requires that it be “obvious” that the lawyer can adequately represent the interest of each client. To pass the “obviousness” test, it must be “objectively clear that the threat to the lawyer’s independent judgment is minimal.” Wolfram, Modern Legal Ethics § 7.2.3 at 341 (1986). Under the “obviousness” test, the question must be asked: would a reasonable lawyer think that one lawyer could not adequately represent the interests of all affected clients? If so, the conflict is “non- consentable.” Simon, Simon’s New York Code of Professional Responsibility Annotated 204 (1995). A consent from a client to a non- consentable conflict is void.
In an advance waiver situation, there is no actual conflict for a lawyer to examine in order to determine whether it is “obvious” that he or she can adequately represent the interests of each client. However, this does not prevent the lawyer from examining the type of representation anticipated for the prospective client and its adversity to the interests of the current client, and from making a reasonable analysis of the probabilities of whether or not this type of representation is likely to give rise to a conflict that is non-consentable. If the determination is that the circumstances of the future conflict may be waived, the lawyer may request the current client prospectively to waive the anticipated conflict.
DR 5-105(C) also requires that the client’s “consent” to the representation be obtained “after full disclosure of the possible effect of such representation on the exercise of the lawyer’s independent professional judgment.” The lawyer must explain any circumstances that might cause a client to question the lawyer’s undivided loyalty. See EC 5-16, EC 5-19. The adequacy of disclosure and consent will depend, as it does in a contemporaneous conflict situation, upon the circumstances of each individual case. See Wolfram, Modern Legal Ethics § 7.2.4 at 343 (1986).
At the very least, the client or prospective client should be advised of the types of possible future adverse representations that the lawyer envisions, as well as the types of clients or matters that may present such conflicts. ABA 372. The lawyer also should disclose the measures that will be taken to protect the client or prospective client should a conflict arise. This could include a disclosure of the procedures (for example, an information screen) that would be put into place to protect client confidences under DR 4-101 of the Code should an adverse representation be undertaken in the future.
The degree of disclosure that must be made in order for the client’s or prospective client’s consent to be “informed” will also depend on other factors. For example, when the lawyer is seeking an advance waiver from a sophisticated client, such as a large corporation with in-house counsel, the adequacy of disclosure will be put to a less stringent test than if the client were a small business, an individual unsophisticated with respect to legal matters, a child or an incapacitated person. See Wolfram, Modern Legal Ethics § 7.2.4 at 347 (1986) (sophisticated parties with extensive business experience who are used to dealing with lawyers are more capable of giving consent than more vulnerable clients); ABA 372 (protections are more important for unsophisticated clients, although even the “worldly wise client is entitled to some protection”); ABA 399 (1996) (approving prospective consent to limit the scope of legal services sought from unsophisticated Legal Services clients if the lawyer takes care to see that the clients have a full understanding of what they are being asked to consent to and that the consent is completely voluntary). Indeed, a “blanket” waiver of future conflicts involving adverse parties may be informed and enforceable depending on the client’s sophistication, its familiarity with the law firm’s practice, and the reasonable expectations of the parties at the time consent is obtained. For example, a subsequent representation may be said to have been reasonably contemplated by a sophisticated client, advised by in-house counsel, who is familiar with a law firm’s multi-disciplinary practice and wide variety of clients. In those circumstances, it may be foreseeable that one or more of such clients may in the future be adverse to the current client in an unrelated matter.
The Code does not require that the facts of each future adverse representation be known to the parties or described with precision in order for consent to be “informed.” If such were the rule, no advance waiver would ever be enforceable; by their nature, such waivers include clients and claims that are not yet known. If the subsequent conflict should have been reasonably anticipated by the original client based on the disclosures made and the scope of the consent sought, we see no reason why the lawyer should not be permitted to rely on such consent under DR 5-105(C).
Notwithstanding that a lawyer may have obtained a client’s consent to a future conflict, the lawyer must reassess the propriety of the adverse concurrent representation under the “obviousness” test discussed above when the conflict actually arises. The lawyer must determine whether he or she can adequately represent the interests of all affected clients at that time. Of course, if the actual conflict that materializes is materially different than the conflict that has been waived, the lawyer may not rely on the consent previously obtained.
A lawyer can seek and a client or prospective client can give an advance waiver with respect to conflicts of interest that may arise in the future. The lawyer must first evaluate whether the future representation is likely to give rise to a non- consentable conflict. If the lawyer determines that the prospective conflict is consentable, he or she can proceed to make full disclosure to the client or prospective client and obtain that person or entity’s consent. The validity of the waiver will depend on the adequacy of disclosure given to the client or prospective client under the circumstances, taking into account the sophistication and capacity of the person or entity giving consent.