FKB's Andrew S. Kowlowitz and Izabell Lemkhen were featured columnists in the New York Law Journal. 12/19/11

Attorney Conflicts: Navigating Waters of Multi-Party Representations
Andrew S. Kowlowitz and Izabell Lemkhen
New York Law Journal
December 19, 2011

Multi-party representation has become commonplace in the professional liability defense arena. Retaining one law firm to handle the defense of multiple insured defendants is a particularly effective strategy for bottom-line driven and cost-conscious insurers. In addition to the fact it controls legal costs, defending more than one insured party in the same legal proceeding may provide defense counsel and insurers with leverage over plaintiff and co-defendants, resulting in a more advantageous settlement. Such a defense arrangement is not without its potential "pitfalls." Attorneys who engage in the representation of multiple parties must be cognizant of potential conflicts of interest. Conflicts of interest, if improperly handled, may lead not only to professional discipline, but also to a civil claim.

In this article, we will examine how the New York Rules of Professional Conduct defines a conflict of interest, and the steps an attorney must ordinarily take when confronted with a potential conflict. We will also examine how a potential conflict of interest may result in a civil claim, and the defenses ordinarily raised to defeat such a claim.

Rule and Waiver

The New York Rules of Professional Conduct¹ precludes multi-party representation if a lawyer's loyalty and independent judgment are compromised by the representation of two or more parties with differing interests. Rule 1.7 specifically addresses conflicts of interest. Rule 1.7 (b) provides that notwithstanding the existence of a conflict of interest, a lawyer may represent a client if, among other things, "the lawyer reasonably believes [she] will be able to provide competent and diligent representation to each affected client," "the representation does not involve the assertion of a claim by one client against another client represented by the same lawyer in the same litigation or other proceeding before a tribunal," and "each affected client gives informed consent, confirmed in writing." ²

A conflict arises 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 is adversely affected by the lawyer's representation of, or responsibilities to, another client. In the context of litigation, common examples of potential conflicts of interest arise when there is a substantial discrepancy in the clients' testimony, an incompatibility in positions or distinct settlement postures. For example, if a lawyer is confronted with substantially different testimony concerning the same event by two separate clients in a single proceeding, the attorney may not be in a position to credibly advance either client's position effectively – as each client's version of events are at odds with one another.

A conflict may also manifest when one client is staunchly opposed to settling, while the other client wishes to pursue settlement. Again, in that instance, each client's opposing position would handicap the lawyer's ability to advance the wishes of either client.

While such blatant conflicts often require the attorney to withdraw from the representation, or decline the representation from the onset, Rule 1.7 nevertheless provides that certain conflicts or potential conflicts of interest may be waivable. Rule 1.7 provides that a conflict is subject to waiver provided that the lawyer reasonably believes she will be able to provide competent and diligent representation to each affected client, and the multi-party representation does not involve the assertion of a claim by one client against another. Rule 1.7(b)(4) further requires that when a waivable conflict is presented, each affected client provide informed consent "confirmed in writing."

As an initial matter, informed consent requires that each affected client be made aware of the relevant circumstances, including the foreseeable ways in which the conflict may impact his interests. The amount of information actually conveyed by the conflicted lawyer typically depends on the nature of the conflict, the risks involved and the sophistication of the client. Further, the affected client must also be given the right to obtain other, "independent" counsel, if the client so chooses. Thus, the rules allow for discretion and permit an attorney to exercise her judgment when determining the amount and scope of information to be conveyed in obtaining informed consent. Naturally, lawyers presented with an obligation to disclose a potential conflict are best served to "err on the side of caution," and provide an affected client with a more extensive disclosure.

Further, in order to satisfy the requirement that informed consent be "confirmed in writing," Rule 1.7(b) contemplates one of three methods: 1) a document from the client; 2) a document that a lawyer promptly transmits to the client confirming an oral informed consent; or 3) a statement by the client made on the record of any proceeding before a tribunal.

Civil Claims

The failure to comply with Rule 1.7 may result in a disciplinary violation, and also a civil claim, sounding in breach of fiduciary duty or legal malpractice. While the Attorney Disciplinary Committee would consider whether disciplinary action should be taken against an attorney for such a violation, the courts are often called upon to consider whether a conflict of interest otherwise supports a civil claim.

As a threshold matter, the case law in New York is clear that a violation of the Rules of Professional Conduct by itself is insufficient to support a civil claim for conflict of interest, breach of fiduciary duty or legal malpractice.³ Rather, in order to advance a civil claim hinged upon an attorney's conflict of interest, a former client must plead and prove: 1) The conflict prevented the attorney from providing competent representation; and

2) The failure to render competent representation (as a result of the conflict of interest) was the proximate cause of actual damages.⁴ In other words, a former client pursuing a claim predicated on an attorney's conflict of interest is not absolved of the pleading requirements or the burden of proof ordinarily imposed on a plaintiff in a professional liability or legal malpractice claim. In fact, New York courts have expressly held that the heightened proximate causation standard that applies to a claim for legal malpractice – i.e., the "but for" proximate causation standard – also applies to claims arising from a conflict of interest.⁵ Thus, a former client must plead and prove that "but for" the conflict of interest, she would have achieved a different, more favorable result. The practical application of the heightened causation pleading requirement is best illustrated through an example. Suppose an attorney agrees to represent two defendant physicians in a medical malpractice action. In this hypothetical, the medical malpractice plaintiff alleges that co-defendant Radiologist failed to diagnose a cancerous tumor and co-defendant Treating Physician, post-diagnosis, failed to provide appropriate medical care. Suppose further that the medical malpractice action proceeds to trial and there is ultimately a finding of liability against both defendants. Co-defendant Radiologist is found liable in the amount of $500,000, and co-defendant Treating Physician is also found liable in the amount of $500,000.

Afterwards, Radiologist sues his former attorney alleging the attorney's joint representation of the Radiologist and Treating Physician at trial presented a conflict of interest. Radiologist alleges that his defense at trial should have been premised on a theory that the Treating Physician's inadequate treatment of the plaintiff patient was the sole cause of the plaintiff's injury, and that the conflicted attorney could not advance this defense in light of the dual representation.

In this hypothetical, the Radiologist – in order to prevail on his claim against his former attorney – would have to establish that "but for" the conflict of interest (and resulting failure to advance a defense premised on Treating Physician's failure to provide adequate medical care), the Radiologist would have achieved a better result at the underlying medical malpractice trial. In other words, the Radiologist must now prove the proverbial "case within a case" – i.e., the Radiologist would necessarily have to retry the underlying medical malpractice action and demonstrate that the outcome of the trial would have been more favorable had the conflict of interest not existed and the defense attorney advanced the alternative defense theory.⁶ Thus, while engaging in a conflict of interest should and must be avoided, it may be of some consolation to the practicing attorney to know that in the event a conflict were to occur, the heightened proximate causation standard imposed by the courts presents some practical challenges to a former client pursuing a civil claim.

Considerations

Ultimately, avoiding a conflict situation is the responsibility of the attorney. A lawyer who thinks she may be presented with a conflict of interest must consider the potential conflict carefully before agreeing to the dual representation or continuing to act on behalf of her clients. An attorney who represents, or seeks to represent multiple parties that have potentially diverging interests, must carefully weigh the possibility that her judgment may be impaired at some point, and appropriate disclosure of this risk is required.

If an attorney is uncertain as to whether a potential conflict of interest exists or the appropriate action to take upon discovery of a conflict, the New York County Lawyers' Association Ethics Hotline provides free, confidential advice to its members.⁷ Several bar associations throughout the State of New York provide similar counseling, and attorneys who are presented with a potential conflict situation are, of course, encouraged to utilize these free services.

Andrew S. Kowlowitz is a partner of Furman Kornfeld & Brennan. Izabell Lemkhen is an associate with the firm. They can be reached at Akowlowitz@fkblaw.com and Ilemkhen@fkblaw.com.

Endnotes:

1. A complete copy of the rules can be found on the Internet here.

2. Rule 1.7 (b).

3. Shapiro v. McNeil, 92 N.Y.2d 91, 96, 677 N.Y.S.2d 48 (1998); See also Schwartz v. Olshan, 302 A.D.2d 193, 199, 753 N.Y.S.2d 482 (1st Dept. 2003).

4. Amodeo v. Gellert & Quartararo, P.C., 26 A.D.3d 705, 810 N.Y.S.2d 246 (3d Dept. 2006); Coleman v Fox Horan & Camerini, 274 A.D.2d 308, 711 N.Y.S.2d 723 (1st Dept. 2000).

5. Ulico Casualty Company v. Wilson Elser Moskowitz Edelman & Dicker, LLP, 56 A.D.3d 1, 10-11, 865 N.Y.S.2d 14 (1st Dept. 2008).

6. Weil, Gotshal & Manges, LLP v. Fashion Boutique of Short Hills Inc., 10 A.D.3d 267, 780 N.Y.S.2d 593 (1st Dept. 2004).

7. Additional information including the contact information of Hotline staffers is available here.

Home | Email | Site map | Client Rights | Disclaimer | Top of page