Resolving Client Conflicts by Hiring 'Conflicts Counsel'

Abstract

A general principle of legal ethics is that a law firm may not represent a client suing someone who is also a client of the law firm (1) even though the two matters are unrelated, (2) a different law firm represents the client in that law suit, and (3) there is no risk that the lawyer would violate the confidences of any client. Other ethics rules magnify the significance of this rule by imputing the disqualification of every lawyer in the law firm to every other lawyer in the same firm. Courts enforce these rules by disqualifying the offending law firm.

In general, sound reasons support these ethics rules. Yet, there are situations where these rules require disqualification although there is no legitimate client expectation of loss of loyalty or confidence. There is nascent case law in the lower courts that recognizes this problem and offers a solution: using “conflicts counsel,” meaning that the client retains a new lawyer from a different law firm to handle a discrete, severable matter - the matter that created the conflict. Although these cases - typically in the area of discovery and bankruptcy - do not discuss their rationale, their instincts are correct: using conflicts counsel in certain situations mitigates the burden of disqualification while protecting the underlying reasons behind disqualification. Courts should follow these decisions, which are typically unpublished.

Keywords: Disqualification, Professional Responsibility, Bankrutpcy, Discovery, Imputation of Conflicts, Conflicts Counsel, Legal Ethics

JEL Classification: K10, K29, K40, K41, K49, G33