Until the California Supreme Court adopted the new California Rules of Professional Conduct (CRPC) in 2018, California did not have formalized conflict of interest rules (Rules 1.7, 1.9, 1.10, 1.11, and 1.18) advising a California attorney or law firm on how to navigate a particular conflict of interest issue. Prior to 2018, California attorneys had to traverse those issues by navigating former CRPC Rule 3-310(B)(C) and a complex labyrinth of case law, and then bootstrapping a solution to the attorney’s conflict of interest issue. (Woods v. Superior Court (1983) 149 Cal.App.3d 931; Klemm v. Superior Court (1977) 75 Cal.App.3d 893; Ishmael v. Millington (1966) 241 Cal.App.2d 520; State Farm Mutual Automobile Insurance Company v. Federal Insurance Company (1999) 72 Cal.App.4th 1422; Flatt v. Superior Court (1994) 9 Cal.4th 275.) When a client asked me to advise them on such issues, I often reminded them that without clear statutory guidance, many conflict of interest cases involve fact-specific issues. Thus the cases often split on whether or not a case applied to its progeny.
Before discussing the individual conflict of interest rules, you must spend some time understanding the underlying legal theories involved in any given conflict of interest issue. As you know, an attorney is a fiduciary of their client, and conflicts of interest can involve any of the following duties: the duty of undivided loyalty; the duty to exercise independent judgement for clients; the duty of confidentiality; the duty to provide competent representation; and the duty to communication with the client. Starting with an attorney’s duty of loyalty, while the duty is not outlined in the CRPC or the Business and Professions Code, case law accepts that the attorney owes complete fidelity to their client. (Flatt v. Sup.Ct. (Daniel) (1994) 9 Cal.4th 275, 289; Yorn v. Sup.Ct. (Hesemeyer) (1979) 90 Cal.App.3d 669, 675; Cal. State Bar Form. Opn. 1984-83; CRPC 1.7, Comment  (eff. 11/1/18) (no former CRPC); ABA Model Rule 1.7, Comment .)
Additionally, per Business and Professions Code section 6068(e), an attorney must “maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client.” This requires an attorney or law firm to preserve their client’s confidences and not share them with others. Additionally, the duty of confidentiality prohibits an attorney from using or relying upon a client’s confidences in a manner that may injure a client. While you may think this is obvious, often attorneys don’t realize there’s a conflict until they stumble upon the issue when onboarding new employees or taking on new matters that don’t immediately appear to present a conflict with their existing or even former clients. (Parts 2 through 4 of this series will discuss in more detail considerations regarding particular types of conflicts of interest.)
The most difficult conflict that may arise is the duty to exercise independent judgement for clients. This duty is codified in Rule 2.1, which states that “a lawyer shall exercise independent profession judgment and render candid advice.” Rule 2.1 — coupled with Rules 1.2 and 1.2.1 — requires an attorney to consider their client’s goal and objectives while adhering to Business and Professions Code section 6068 and our California Rules of Professional Conduct.
There are times when the attorney’s interests are in direct conflict with the client’s interests, as in an attorney’s duty to comply with Rule 1.2.1 and a client’s desire to destroy or withhold discoverable evidence. Most often this duty is challenged when the client has a different financial interest than the attorney: for example, when a client wishes to settle but the attorney believes that the client can receive more money. Conflicts of interest where the attorney’s interests are in direct conflict with the client’s interests can cloud an attorney’s judgement because these conflicts may require the attorney to withdraw from representation, thus potentially losing a good case or their fees.
When an attorney’s interests potentially conflict with their client’s, the concern is that the conflict will impact the attorney’s duty to provide competent representation, or comply with CRPC Rule 1.1. Rule 1.1(a) prohibits a lawyer from “intentionally, recklessly, with gross negligence, or repeatedly fail to perform legal services with competence.” When a conflict clouds an attorney’s decisions, this could impact the attorney’s ability to competently provide legal services to their client. Again, this arises in a myriad of ways, from two co-clients with diverging interests or in the case of a law firm where two firm attorneys represent two clients in separate matters but adverse to each other. This often happens in large law firms that represent a wide variety of corporate clients in both litigation and transactional matters.
There are times where an attorney’s duty to communicate with a client presents a conflict issue. As attorneys, part of our job is to deliver bad news to clients and provide honest feedback regarding a legal avenue or decision. The communication can be difficult when the attorney knows that the client won’t want to hear the advice, or the information may negatively impact the attorney-client relationship. Yet communication isn’t limited to withholding information: it can include sharing information that benefits one client at the disadvantage of another client. This type of communication most likely doesn’t come in a direct form, such as “I learned from Client A their trade secret.” Rather, it can be indirect, as in where an attorney relies upon client A’s confidential information while advising client B, who is adverse to client A in a seemingly unrelated matter. (Part 2 of this series will address conflict of interest issues between current clients and former clients.)
Finally, best practices call for an attorney to identify and consider conflict of interest issues prior to engaging new clients. Best practices also encourage attorneys to be aware of conflict of interest issues that may evolve with the representation, and be prepared to act once a conflict of interest arises. The next articles in this series will specifically address how conflicts of interest evolve from the attorney-client relationship and will provide practical applications of the rules.
Mary Grace Guzmán of Guzmán Legal Solutions advises lawyers, law firms, and law students on their professional responsibilities and risk management needs. She also teaches legal ethics and professional responsibility at JFK Law School. She works with lawyers and law firms regarding legal ethics issues such as conflict of interest issues, fee disputes, and advises lawyers and law firms as outside ethics counsel to manage risk. Ms. Guzmán recognizes that a lawyer’s or law firm’s needs are best met by preventing legal ethical issues before they arise or managing an ethical issue once identified
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