Attorney’s Fees & Conflicts of Interest Group 1 Richard Campbell, Kristin Haynes, Dan Layden, Ted Naeckel, Lisa Schweitzer Julie Stewart June 9, 2004

Types of Fees Hourly Fees Hourly Fees Hourly rate multiplied by the amount of time spent (usually computed by quarter hour or tenth hour) Hourly rate multiplied by the amount of time spent (usually computed by quarter hour or tenth hour) Encourages any number of gaming strategies to pad the bill Encourages any number of gaming strategies to pad the bill

Types of Fees Flat Fee or Fixed Fee Flat Fee or Fixed Fee Encourages quick work Encourages quick work Settlements, Etc Settlements, Etc Encourages work to be no more thorough than to avoid malpractice Encourages work to be no more thorough than to avoid malpractice Paid the same regardless the amount of work, win or lose Paid the same regardless the amount of work, win or lose Can’t have a fixed fee for a case which may take between 6 months and 4 years Can’t have a fixed fee for a case which may take between 6 months and 4 years

Types of Fees Contingent Fee Contingent Fee Earned only if there is a favorable outcome Earned only if there is a favorable outcome Usually between 25 and 50 percent Usually between 25 and 50 percent Encourages litigation Encourages litigation May be excessive May be excessive

Types of Fees Proportional Fee Proportional Fee Percentage of the value of a particular transaction Percentage of the value of a particular transaction No Fee No Fee Encourages strategic litigation to change the law at the expense of any particular client Encourages strategic litigation to change the law at the expense of any particular client You may choose to lose a case if it will advance the law in the preferred direction, allowing you to win more later on You may choose to lose a case if it will advance the law in the preferred direction, allowing you to win more later on

Model Rule 1.5(b) The scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation, except when the lawyer will charge a regularly represented client on the same basis or rate. Any changes in the basis or rate of the fee or expenses shall also be communicated to the client. The scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation, except when the lawyer will charge a regularly represented client on the same basis or rate. Any changes in the basis or rate of the fee or expenses shall also be communicated to the client.

GA Rule 1.5(b) Fees When the lawyer has not regularly represented the client, the basis or rate of the fee shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation. When the lawyer has not regularly represented the client, the basis or rate of the fee shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation.

Attorney’s Fees Attorney’s fees are a matter of contract Attorney’s fees are a matter of contract Ethical rules place restrictions on the amount and types of fees that may be collected Ethical rules place restrictions on the amount and types of fees that may be collected Fees must be reasonable Fees must be reasonable Fees cannot be illegal or clearly excessive Fees cannot be illegal or clearly excessive

Who pays for litigation? English Rule English Rule Loser of a litigated case must pay the attorneys’ fees of the winner Loser of a litigated case must pay the attorneys’ fees of the winner American Rule American Rule Each party pays their own way Each party pays their own way Few common law exceptions Few common law exceptions Common Fund exceptions Common Fund exceptions “a reasonable fee is based on a percentage of the fund bestowed on the class” “a reasonable fee is based on a percentage of the fund bestowed on the class” Fees may be awarded to a party when the opposing litigates in bad faith Fees may be awarded to a party when the opposing litigates in bad faith

Fee Shifting Statutes 100 Federal Statutes and 2,000 State Statutes 100 Federal Statutes and 2,000 State Statutes “One Way” Shifting “One Way” Shifting Winning Plaintiff is entitled to Attorney’s Fees Winning Plaintiff is entitled to Attorney’s Fees Winning Defendant is not entitled to Attorney’s Fees Winning Defendant is not entitled to Attorney’s Fees

Fee Agreements Written Fee Agreements Written Fee Agreements Agreements should include Agreements should include Fees Fees Scope of representation Scope of representation Relevant Ethical Issues Relevant Ethical Issues Engagement Retainer Fees Engagement Retainer Fees Non-refundable fee to secure an attorney’s availability to perform services Non-refundable fee to secure an attorney’s availability to perform services Separate from fees to work actually performed Separate from fees to work actually performed Will be upheld when the client is sophisticated and experienced Will be upheld when the client is sophisticated and experienced Not upheld when the client is a inexperienced and unsophisticated Not upheld when the client is a inexperienced and unsophisticated

Enforcing Fee Agreements Two kinds of Liens Two kinds of Liens Charging Lien Charging Lien Lawyer make claims against proceeds of a settlement or judgment in the amount of unpaid fees Lawyer make claims against proceeds of a settlement or judgment in the amount of unpaid fees Retaining Lien Retaining Lien Lawyer retains the clients documents prepared by the lawyer until the fees are paid Lawyer retains the clients documents prepared by the lawyer until the fees are paid

Model Rule 1.5(a) Factors Determining Reasonableness of Fees Time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; Time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; The fee customarily charged in the locality for similar legal services; The fee customarily charged in the locality for similar legal services; The amount involved and the results obtained; The amount involved and the results obtained; The time limitations imposed by the client or by the circumstances; The time limitations imposed by the client or by the circumstances; The nature and length of the professional relationship with the client; The nature and length of the professional relationship with the client; The experience, reputation, and ability of the lawyer or lawyers performing the services; and The experience, reputation, and ability of the lawyer or lawyers performing the services; and Whether the fee is fixed or contingent. Whether the fee is fixed or contingent.

GA Rule 1.5(a) Fees A lawyer's fee shall be reasonable. The factors to be considered in determining the reasonableness of a fee include the following: A lawyer's fee shall be reasonable. The factors to be considered in determining the reasonableness of a fee include the following: the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; the likelihood that the acceptance of the particular employment will preclude other employment by the lawyer; the likelihood that the acceptance of the particular employment will preclude other employment by the lawyer; the fee customarily charged in the locality for similar legal services; the fee customarily charged in the locality for similar legal services; the amount involved and the results obtained; the amount involved and the results obtained; the time limitations imposed by the client or by the circumstances; the time limitations imposed by the client or by the circumstances; the nature and length of the professional relationship with the client; the nature and length of the professional relationship with the client; the experience, reputation, and ability of the lawyer or lawyers performing the services; and the experience, reputation, and ability of the lawyer or lawyers performing the services; and whether the fee is fixed or contingent. whether the fee is fixed or contingent.

Hourly Fees In the Matter of Fordham In the Matter of Fordham Note that it is considered unethical to charge a “reasonable amount” for work if a lawyer can perform that work more quickly that “reasonable” Note that it is considered unethical to charge a “reasonable amount” for work if a lawyer can perform that work more quickly that “reasonable” It is also unethical to charge more that a “reasonable amount” if a lawyer can only perform the work more slowly than another lawyer It is also unethical to charge more that a “reasonable amount” if a lawyer can only perform the work more slowly than another lawyer The court feels justified in determining maximum fees for lawyers. The court feels justified in determining maximum fees for lawyers. Any anti-trust/price fixing issues there? Any anti-trust/price fixing issues there? What about consideration in contracts? What about consideration in contracts?

Hourly Fees In The Matter of Fordham In The Matter of Fordham Excessive fees for criminal defense Excessive fees for criminal defense Billing for Learning Time Billing for Learning Time Model Code states that an attorney may in good faith take a job in which he expects to become qualified by study and investigation Model Code states that an attorney may in good faith take a job in which he expects to become qualified by study and investigation So long as preparation would not result in unreasonable delay or expense So long as preparation would not result in unreasonable delay or expense Hourly billing began in the 1960’s Hourly billing began in the 1960’s

Model Rule 1.5(c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A Contingent fee agreement shall be in a writing signed by the client and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal; litigation and other expenses to be deducted from the recovery; and whether such expenses are to be deducted before or after the contingent fee is calculated. The agreement must clearly notify the client of any expenses for which the client will be liable whether or not the client is the prevailing party upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination. A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A Contingent fee agreement shall be in a writing signed by the client and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal; litigation and other expenses to be deducted from the recovery; and whether such expenses are to be deducted before or after the contingent fee is calculated. The agreement must clearly notify the client of any expenses for which the client will be liable whether or not the client is the prevailing party upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination.

A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall be in writing and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, litigation and other expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingent fee is calculated A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall be in writing and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, litigation and other expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingent fee is calculated Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the following : Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the following : the outcome of the matter; and the outcome of the matter; and if there is a recovery, showing the: if there is a recovery, showing the: remittance to the client; remittance to the client; the method of its determination; the method of its determination; the amount of the attorney fee; and the amount of the attorney fee; and if the attorney's fee is divided with another lawyer who is not a partner in or an associate of the lawyer's firm or law office, the amount of fee received by each and the manner in which the division is determined. if the attorney's fee is divided with another lawyer who is not a partner in or an associate of the lawyer's firm or law office, the amount of fee received by each and the manner in which the division is determined. GA Rule 1.5(c) Fees

Contingent Fees: Reasonableness  Gagnon v. Shoblom It is not the discretion of the court to determine the reasonableness of fees paid according to agreement between the attorney and the client It is not the discretion of the court to determine the reasonableness of fees paid according to agreement between the attorney and the client Contingent fee agreement are said to be the “poor man’s key to the courthouse” Contingent fee agreement are said to be the “poor man’s key to the courthouse” Court still feels justified in determining maximum fees Court still feels justified in determining maximum fees Here the fees were below the legislature’s maximum Here the fees were below the legislature’s maximum How is it possible to find that 25% is reasonable and 33.3% is unreasonable How is it possible to find that 25% is reasonable and 33.3% is unreasonable No guidelines really appear to be applied here No guidelines really appear to be applied here

Model Rule 1.5 (d) A lawyer shall not enter into an arrangement for, charge, or collect: A lawyer shall not enter into an arrangement for, charge, or collect: Any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof; or Any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof; or A contingent fee for representing a defendant in a criminal case. A contingent fee for representing a defendant in a criminal case.

A lawyer shall not enter into an arrangement for, charge, or collect: A lawyer shall not enter into an arrangement for, charge, or collect: any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof; or any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof; or a contingent fee for representing a defendant in a criminal case. a contingent fee for representing a defendant in a criminal case. The maximum penalty for a violation of this Rule is a public reprimand. The maximum penalty for a violation of this Rule is a public reprimand. GA Rule 1.5(d) Fees

Categorical Restrictions on Contingent Fees Criminal Law Criminal Law Fogarty v. State Fogarty v. State Man arrested and charged with kidnapping, assault, simple battery and nine counts of stalking. Man arrested and charged with kidnapping, assault, simple battery and nine counts of stalking. Wife agreed to pay $25,000 for defense counsel if the case went to trial, however, if the charges were dismissed the fee would be reduced to $10,000 Wife agreed to pay $25,000 for defense counsel if the case went to trial, however, if the charges were dismissed the fee would be reduced to $10,000 The jury acquitted him on six counts of stalking but found him guilty on the other six counts. The jury acquitted him on six counts of stalking but found him guilty on the other six counts. Suit for ineffective counsel Suit for ineffective counsel To prevail an ineffective counsel suit, plaintiff must meet the Strickland test To prevail an ineffective counsel suit, plaintiff must meet the Strickland test Performance was deficient Performance was deficient Deficient performance prejudiced the defense Deficient performance prejudiced the defense Court of Appeals found that the attorney contracted for an improper contingency fee Court of Appeals found that the attorney contracted for an improper contingency fee

Categorical Restrictions on Contingent Fees Family Law Family Law Barngrover v. Pettigrew Barngrover v. Pettigrew Attorney hired to handle client’s divorce Attorney hired to handle client’s divorce Client paid $25 and was to pay an additional $1000 when the attorney secured a successful divorce for the client Client paid $25 and was to pay an additional $1000 when the attorney secured a successful divorce for the client Wife was able to obtain a divorce without opposition Wife was able to obtain a divorce without opposition Attorney is seeking to recover on a quantum meruit for the value of the services rendered Attorney is seeking to recover on a quantum meruit for the value of the services rendered Court determined that the contract for the attorney’s services was illegal and could not rely on the illegal contract to establish the cause of action Court determined that the contract for the attorney’s services was illegal and could not rely on the illegal contract to establish the cause of action Contingent fees are improper in divorce and child custody Contingent fees are improper in divorce and child custody Where the fee is contingent on obtaining a divorce or a particular result with respect to child custody or property settlement Where the fee is contingent on obtaining a divorce or a particular result with respect to child custody or property settlement

Categorical Restrictions on Contingent Fees Family law King v. Young, Berkman, Berman & Karpf King v. Young, Berkman, Berman & Karpf The client was to pay a bonus in the event of a favorable outcome is a divorce proceeding The client was to pay a bonus in the event of a favorable outcome is a divorce proceeding Additional to the hourly fees already paid in the course of the dissolution Additional to the hourly fees already paid in the course of the dissolution Trial Court awarded the firm the additional fees and the client appealed Trial Court awarded the firm the additional fees and the client appealed Florida Rule 4-1.5(f)(3) “[a] lawyer shall not enter into an arrangement for, charge or collect … any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or a property settlement in lieu thereof …” Florida Rule 4-1.5(f)(3) “[a] lawyer shall not enter into an arrangement for, charge or collect … any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or a property settlement in lieu thereof …” Court found the fee was unenforceable and that the firm was entitled to collect on the basis of quantum meruit Court found the fee was unenforceable and that the firm was entitled to collect on the basis of quantum meruit The amount already collected in fees was fair compensation The amount already collected in fees was fair compensation

Model Rule 1.5(d) Fees in Criminal and Family Law A lawyer shall not enter into an arrangement for, charge, or collect: A lawyer shall not enter into an arrangement for, charge, or collect: Any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof; or Any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof; or A contingent fee for representing a defendant in a criminal case. A contingent fee for representing a defendant in a criminal case.

Review Question Charlene went to the law office of Leopard and told Leopard that she wished to divorce her hard-drinking, abusive husband, Buster. However, since she was a housewife, she told Leopard that she could not afford to pay a big lawyer’s fee. Leopard was sure that Charlene had adequate grounds for divorce in that Buster was adulterous, alcoholic, and frequently beat Charlene. Therefore, Leopard told Charlene, “The filing fees for a divorce in this county amount to $135. If you can put up that much money, I’ll do all the work for 10% of whatever I get you for alimony and child support.” Charlene was elated and replied, “Thank you! Thank you! I’m sure I can find or borrow $135. So many lawyers want a big fee up front, and you’ve just told me you’ll get me out of this living Hell for $135 up front! God bless you, Leopard, you’re a wonderful man!”

Review Question Leopard left his office that night with a warm feeling that he had helped a fellow human being, secure in the knowledge that at least one person in the community would have something nice to say about lawyers. However, personal satisfaction aside, was Leopard’s conduct proper?

(a) Yes, unless the fee that Leopard eventually earns proves to be excessive. (b) Yes, because he is providing legal services to persons who might not otherwise be able to afford them. (c) No, because contingent fee arrangements are inappropriate in divorce cases. (d) No, if Charlene was indignant and Leopard did not advance her the filing fees.

Review Question Two years ago, Weaver obtained a divorce from her husband Hubbard in State A. The court awarded Weaver custody of the three children and ordered Hubbard to pay Weaver $3000/month in child support and alimony payments. The attorney who represented Weaver in the divorce proceedings died. Hubbard failed to make the $3000 payments for 17 months in a row. Weaver ran out of money and in desperation hired attorney Avilla to represent her in a proceeding to collect the past due payments from Hubbard. State A has no law or court rule that requires the loser to pay the winner’s attorneys’ fees in domestic relations matters.

Review Question Because Weaver had no money to pay Avilla a regular fee, Avilla agreed to do the work on a contingent fee basis for 10% of whatever amount Weaver was ultimately able to recover. Avilla won an award for Weaver of the entire amount due ($51,000), and by tracking down and attaching Hubbard’s secret bank account, he got the full amount paid to Weaver. He then sent Weaver a bill for his share $5100. Is Avilla subject to discipline?

(a) No, unless $5100 is an unreasonably high fee for work Avilla did. (b) No, because Weaver had no money to pay a regular fee. (c) Yes, because Avilla used a contingent fee in a domestic relations matter. (d) Yes, because Avilla took a portion of the money that was intended for support of Weaver and the children.

Post-Termination Right to Fees Galanis v. Lyons & Truitt Galanis v. Lyons & Truitt When a lawyer is terminated prior to resolution of a case and has contributed a substantial amount to effort When a lawyer is terminated prior to resolution of a case and has contributed a substantial amount to effort Is he entitled to compensation for his time? Is he entitled to compensation for his time? Who should be required to pay the terminated lawyer? Who should be required to pay the terminated lawyer? Conventional rule is a lawyer terminated under a contingent fee agreement is entitled to quantum meruit recovery for the reasonable value of the services rendered to the client, and not the full amount of the agreed contingent fee. Conventional rule is a lawyer terminated under a contingent fee agreement is entitled to quantum meruit recovery for the reasonable value of the services rendered to the client, and not the full amount of the agreed contingent fee. The client is not required to pay two fees and therefore the successor attorney is required to pay The client is not required to pay two fees and therefore the successor attorney is required to pay Unless parties agree otherwise, in writing Unless parties agree otherwise, in writing Is there a way to withdraw without turning the work over to the follow up firm? Is there a way to withdraw without turning the work over to the follow up firm?

Model Rule 1.5 (e) A division of a fee between lawyers who are not in the same firm may be made only if: A division of a fee between lawyers who are not in the same firm may be made only if: The division is in proportion to the services performed by each lawyer or, each lawyer assumes joint responsibility for the representation; The division is in proportion to the services performed by each lawyer or, each lawyer assumes joint responsibility for the representation; The client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; and The client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; and The total fee is reasonable. The total fee is reasonable.

GA Rule 1.5(e) Fees A division of a fee between lawyers who are not in the same firm may be made only if: A division of a fee between lawyers who are not in the same firm may be made only if: the division is in proportion to the services performed by each lawyer or, by written agreement with the client, each lawyer assumes joint responsibility for the representation; the division is in proportion to the services performed by each lawyer or, by written agreement with the client, each lawyer assumes joint responsibility for the representation; the client is advised of the share that each lawyer is to receive and does not object to the participation of all the lawyers involved; and the client is advised of the share that each lawyer is to receive and does not object to the participation of all the lawyers involved; and the total fee is reasonable. the total fee is reasonable. The maximum penalty for a violation of this Rule is a public reprimand. The maximum penalty for a violation of this Rule is a public reprimand.

Fee Sharing and Fee Splitting Between lawyers in different firms Between lawyers in different firms Ford v. Albany Medical Center Ford v. Albany Medical Center One attorney consulted and performed some initial work in medical malpractice case, which was later given to another firm One attorney consulted and performed some initial work in medical malpractice case, which was later given to another firm Original attorney wants the agreed compensation for the work done Original attorney wants the agreed compensation for the work done Court finds that attorney is entitled to compensation computed on a contingent fee percentage based on quantum meruit Court finds that attorney is entitled to compensation computed on a contingent fee percentage based on quantum meruit

Fee Sharing and Fee Splitting Between Lawyers and Non-lawyers Between Lawyers and Non-lawyers Gorman v. Grodensky Gorman v. Grodensky Non-lawyer hired to manage a firms ‘Collection Division” on the agreement that he would receive a portion of the profits. Non-lawyer hired to manage a firms ‘Collection Division” on the agreement that he would receive a portion of the profits. Code of Professional Responsibility DR3-102 Code of Professional Responsibility DR3-102 A lawyer or law firm shall not share legal fees with a non- lawyer, except that A lawyer or law firm shall not share legal fees with a non- lawyer, except that A lawyer or law firm may include non-lawyer employees in a retirement plan, even though the plan is based on profit sharing A lawyer or law firm may include non-lawyer employees in a retirement plan, even though the plan is based on profit sharing Court refuses to enforce agreement because it violates public policy. Court refuses to enforce agreement because it violates public policy.

Conflicts of Interest Lawyers owe a number of core duties to clients Lawyers owe a number of core duties to clients Duty of competence, loyalty, confidentiality Duty of competence, loyalty, confidentiality If there is a conflict of interest these duties may be compromised If there is a conflict of interest these duties may be compromised The lawyer may be conflicted because he owes a duty to “someone else” The lawyer may be conflicted because he owes a duty to “someone else” Another client Another client A third party A third party The lawyer himself or herself The lawyer himself or herself

Conflicts of interest are the most commonly-litigated category of lawyer misconduct Conflicts of interest are the most commonly-litigated category of lawyer misconduct Subject to a number of sanctions Subject to a number of sanctions Disciplined by the bar Disciplined by the bar Sued by client for legal malpractice or breach of fiduciary duty or rescission of conflict tainted transaction Sued by client for legal malpractice or breach of fiduciary duty or rescission of conflict tainted transaction Forfeiture of fee for conflicted representation Forfeiture of fee for conflicted representation Disqualification from representing a particular client Disqualification from representing a particular client Conflicts of Interest

Model Rule 1.7(a) Conflict of interest Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: The representation of one client will be directly adverse to another client; or The representation of one client will be directly adverse to another client; or There is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer. There is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

Model Rule 1.7(b) Conflict of Interest Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if: Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if: The lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; The lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; The representation is not prohibited by law; The representation is not prohibited by law; The representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and The representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and Each affected client gives informed consent, confirmed in writing. Each affected client gives informed consent, confirmed in writing.

GA Rule 1.7(a) Conflict of Interest: General Rule A lawyer shall not represent or continue to represent a client if there is a significant risk that the lawyer’s own interest or the lawyer’s duties to another client, a former client, or a third person will materially and adversely affect the representation of the client, except as permitted in (b). A lawyer shall not represent or continue to represent a client if there is a significant risk that the lawyer’s own interest or the lawyer’s duties to another client, a former client, or a third person will materially and adversely affect the representation of the client, except as permitted in (b).

GA Rule 1.7(b) Conflict of Interest: General Rule If client consent is permissible a lawyer may represent a client notwithstanding a significant risk of material and adverse effect if each affected or former client consents, preferably in writing, to the representation after: If client consent is permissible a lawyer may represent a client notwithstanding a significant risk of material and adverse effect if each affected or former client consents, preferably in writing, to the representation after: Consultation with the lawyer, Consultation with the lawyer, Having received in writing reasonable and adequate information about the material risks of the representation, and Having received in writing reasonable and adequate information about the material risks of the representation, and Having been given the opportunity to consult with independent counsel. Having been given the opportunity to consult with independent counsel.

GA Rule 1.7(c) Conflict of Interest: General Rule Client consent is not permissible if the representation: Client consent is not permissible if the representation: Is prohibited by law or these rules; Is prohibited by law or these rules; Includes the assertion of a claim by one client against another client represented by the lawyer in the same or substantially related proceeding; or Includes the assertion of a claim by one client against another client represented by the lawyer in the same or substantially related proceeding; or Involves circumstances rendering it reasonably unlikely that the lawyer will be able to provide adequate representation to one or more of the affected clients. Involves circumstances rendering it reasonably unlikely that the lawyer will be able to provide adequate representation to one or more of the affected clients. The maximum penalty for a violation of this Rule is disbarment. The maximum penalty for a violation of this Rule is disbarment.

Conflicts: Lawyers own financial interests Comm. on Professional Ethics and Conduct of Iowa State Bar Ass’n v. Mershon Comm. on Professional Ethics and Conduct of Iowa State Bar Ass’n v. Mershon Attorney entered into a corporation to develop land, where one man would contribute the land (40% ownership), another engineering services (40% ownership) and the attorney would supply legal services (20% ownership) Attorney entered into a corporation to develop land, where one man would contribute the land (40% ownership), another engineering services (40% ownership) and the attorney would supply legal services (20% ownership) Development never came to fruition and the land donator died Development never came to fruition and the land donator died Dispute arose in determining what to do with the land and the corporation, nothing was stipulated at the formation of the corp. Dispute arose in determining what to do with the land and the corporation, nothing was stipulated at the formation of the corp. Lawyers are required to disclose every relevant fact and circumstance before entering into business agreements with a client Lawyers are required to disclose every relevant fact and circumstance before entering into business agreements with a client Burden is on the attorney to show that all relevant facts were disclosed Burden is on the attorney to show that all relevant facts were disclosed Court found that the attorney did not fully disclose and did not advise that the land owner seek independent advice before forming corp. Court found that the attorney did not fully disclose and did not advise that the land owner seek independent advice before forming corp. Lawyer must give equivalent of independent advice or advise the client to seek independent counsel Lawyer must give equivalent of independent advice or advise the client to seek independent counsel Even though he did not profit from the transaction, the court found that there was a violation and reprimanded the attorney. Even though he did not profit from the transaction, the court found that there was a violation and reprimanded the attorney.

Lawyers are not prohibited from entering into business transactions with clients, however the court regards these transactions “with suspicion and disfavor” Lawyers are not prohibited from entering into business transactions with clients, however the court regards these transactions “with suspicion and disfavor” Basis for the rule is common law rules of fiduciary duties Basis for the rule is common law rules of fiduciary duties Lawyers cannot take an interest in a client’s business as payment for part or all of a fee Lawyers cannot take an interest in a client’s business as payment for part or all of a fee Attorney has the burden of proving that the transaction was fair and reasonable to the client Attorney has the burden of proving that the transaction was fair and reasonable to the client Failure to do so will result in the client having the transaction voided and rescission or damages or both Failure to do so will result in the client having the transaction voided and rescission or damages or both Conflicts: Lawyers own interests

Passante v. McWilliam Passante v. McWilliam Baseball card case Baseball card case Lawyer for Upper Deck secured loan for necessary supplies and the company offered 3% of the corporations stock Lawyer for Upper Deck secured loan for necessary supplies and the company offered 3% of the corporations stock Company later reneged on its promise Company later reneged on its promise Trial judge found that lawyer violated ethical duty Trial judge found that lawyer violated ethical duty Lawyer did not recommend that the company seek independent advice before making the promise to explore all possible complications that may arise Lawyer did not recommend that the company seek independent advice before making the promise to explore all possible complications that may arise Lawyer argues that the stock was a gift not a promise bargained for (which would violate the ethical duties) Lawyer argues that the stock was a gift not a promise bargained for (which would violate the ethical duties) Court finds that either way the grant of stock is legally unenforceable Court finds that either way the grant of stock is legally unenforceable Restatements §127(2) states that a lawyer may not accept gifts from clients unless Restatements §127(2) states that a lawyer may not accept gifts from clients unless Lawyer is family “or other natural object of the client’s generosity Lawyer is family “or other natural object of the client’s generosity Value of gift is insubstantial Value of gift is insubstantial Client has obtained independent counsel before making the gift Client has obtained independent counsel before making the gift Conflicts: Lawyers own interests

Conflicts: Sexual Relationships with Clients In Re Rinella In Re Rinella Divorce attorney accused of sexual misconduct with 2 clients and another client of his firm Divorce attorney accused of sexual misconduct with 2 clients and another client of his firm Attorney used position to secure sexual favors from the women Attorney used position to secure sexual favors from the women Court found that the misconduct was grounds for discipline Court found that the misconduct was grounds for discipline Three year suspension from the practice of law Three year suspension from the practice of law Ongoing sexual relationships Ongoing sexual relationships Lawyer is not prohibited from representing a client because of a sexual relationship so long as the relationship began before the representation Lawyer is not prohibited from representing a client because of a sexual relationship so long as the relationship began before the representation Prior relationships (terminated) also do not give rise to an ethical violation requiring disqualification from the representation Prior relationships (terminated) also do not give rise to an ethical violation requiring disqualification from the representation