“Whose Bed Have Your Boots Been Under?”: Identifying and Addressing Potential Conflicts of Interest

by Paige Tackett

Conflicts of interest are a common basis for legal malpractice claims and grievance complaints, in addition to disqualification motions. While not all conflicts are actionable, a malpractice claim or motion to disqualify may be avoided by understanding the duties owed to a client, situations that give rise to potential conflicts, and the required disclosures to a client.

The Texas Disciplinary Rules of Professional Conduct set forth the minimum standards for a lawyer’s conduct. They do not per se establish a cause of action, but Texas courts look to the disciplinary rules as standards of conduct for attorneys in legal malpractice cases.  See Vail v. Havana Painting Co., Inc., 761 S.W.2d 398, 400 (Tex. App.—Houston [14th Dist.] 1988, writ denied). A lawyer “shall not represent opposing parties to the same litigation.” Tex. Disciplinary Rules of Prof. Conduct 1.06(a). If a judgment favorable to one of the parties will directly impact unfavorably on the other party, then the parties are opposing. Id. at cmt. 2. Except as otherwise permitted, “a lawyer shall not represent a person if the representation of that person: (1) involves a substantially related matter in which that person’s interests are materially and directly adverse to the interests of another client of the lawyer or the lawyer’s firm; or (2) reasonably appears to be or become adversely limited by the lawyer’s or law firm’s responsibilities to another client or to a third person or by the lawyer’s or law firm’s own interests. Id. at 1.06(b). Members of a firm may not knowingly represent a client if any of the members practicing alone would be prohibited from doing so. See id. at 1.06(f).

Courts hold matters are “substantially related” when a genuine threat exists that a lawyer may divulge in one matter confidential information obtained in the other because the facts and issues involved in both are so similar. See In re Epic Holdings, Inc., 985 S.W.2d 41 (Tex. 1998); see also NCNB Texas National Bank v. Coker, 765 S.W.2d 398, 399-400 (Tex. 1989). The representation of one client is directly adverse to the representation of another client if the lawyer’s independent judgment on behalf of a client, or the lawyer’s ability or willingness to consider, recommend, or carry out a course of action, will be or is reasonably likely to be adversely affected by the lawyer’s representation of, or responsibilities to, the other client. Tex. Disciplinary Rules of Prof. Conduct 1.06(a), cmt. 6.

A lawyer may represent a client in the circumstances described in Rule 1.06(b) if: (1) the lawyer reasonably believes the representation of each client will not be materially affected; and (2) each affected or potentially affected client consents to such representation after full disclosure of the existence, nature, implications, and possible adverse consequences of the common representation and the advantages involved, if any. Id. at 1.06(b).

The question of conflict must be resolved as to each client, beginning with a full disclosure of the pros and cons of a joint representation. Where a lawyer is justified in representing clients with differing interest, “it is nevertheless essential that each client be given the opportunity to evaluate his need for representation free of any potential conflict and to obtain other counsel if he so desires.” Employers Casualty Co. v. Tilley, 496 S.W.2d 552 (Tex. 1973). There is no requirement that disclosure and consent be in writing, but it would be “prudent” to provide all affected clients with “at least a written summary of the considerations disclosed.” Id. at cmt. 8. If a lawyer concludes that a client should not agree to representation under the circumstances, then he or she should not seek consent or provide representation on the basis of consent. See Tex. Disciplinary Rules of Prof. Conduct 1.06, cmt. 7.

A lawyer’s duty to a client to avoid conflicts of interest does not cease to exist when the matter is resolved or the representation ends. Id. at 1.09. Conflicts of interest may arise whenever a lawyer contemplates representing another client in related matters, or when the representation may jeopardize confidential information of a former client. Id. “Without a former client’s consent, a lawyer should not represent another person in a matter adverse to the former client when the lawyer represented the former client in the same matter or substantially related matter” Centerline Industries v. Knize, 894 S.W.2d 874, 876 (Tex. App.—Waco 1995, orig. proceeding); see also Tex. Disciplinary Rules of Prof. Conduct 1.09(a)(3).

The process of evaluating conflicts of interest does not stop once a file is opened; conflicts may develop as a case progresses or when a new lawyer joins the firm. Lawyers at all practice levels have a professional responsibility to their clients, and each other, to identify and address potential conflicts when they arise.

Paige Tackett is an associate at Thompson, Coe, Cousins & Irons, LLP.  She can be reached at ptackett@thompsoncoe.com

 

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