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Archives for April 7, 2015

The Colorado Lawyer: Conflicts Check—Just Do It

Editor’s Note: This article originally appeared in the January 2015 issue of The Colorado Lawyer. Reprinted with permission.

By J. Randolph Evans, Shari L. Klevens, and Lino S. LipinskyEvans-Klevens-Lipinsky


Authors’ Note
Readers’ comments and feedback on this series of “WhoopsLegal Practice Malpractice Prevention” articles are welcomed and appreciated. References in the articles to “safest courses to proceed,” “safest course,” or “best practices” are not intended to suggest that the Colorado Rules require such actions. Often, best practices and safest courses involve more than just complying with the Rules. In practice, compliance with the Rules can and should avoid a finding of discipline in response to a grievance or a finding of liability in response to a malpractice claim. However, because most claims and grievances are meritless, effective risk management in the modern law practice involves much more. Hence, best practices and safer courses of action do more; they help prevent and more quickly defeat meritless claims and grievances. Other than billing, there is virtually nothing that attorneys dread more than addressing potential conflicts of interest. After all, resolving conflicts issues requires and attorney to focus on why not to take on a new representation rather than how to get the business in the door. However, unidentified or unresolved conflict issues cost lawyers more—in both clients and money—than most attorrneys realize.


Legal publications are replete with articles about motions to disqualify, disciplinary cases, and legal malpractice claims based on an unidentified or unresolved conflict of interest. Even when successfully defended, conflict-based allegations cost lawyers time and money. When lawyers lose, the risks are serious. The attorney could be disqualified from representing the client, face discipline for violating the Rules of Professional Conduct, receive an unfavorable jury verdict, or be forced to pay punitive damages based on a finding of disloyalty. The Office of the Presiding Disciplinary Judge (PDJ) takes conflicts of interest violations very seriously.[1]

In addition, judges and juries may well disregard defenses to claims (such as the protections of independent professional judgment or “trial tactics”) based on a breach of the lawyer’s fundamental fiduciary duty of loyalty to the client. Unfortunately, in today’s fast-paced world, the path of least resistance when a new client walks in the door is to get started on the case without performing even a rudimentary conflicts check. When it comes to conflicts, however, haste really does make waste.

Rule 1: Identify Conflicts Before Representation

Conflicts do not get better with time and cannot simply be undone. Once a conflict-laden representation begins, one cannot simply give back the confidences and secrets and forget it ever happened. When the attorney–client relationship attaches under a cloud of a potential or actual conflict of interest, there is no going back to the way things were before. For this reason, the attorney must identify and resolve conflicts of interest before the attorney–client relationship begins. It is one of those areas where an ounce of prevention really is worth a pound (if not a ton) of cure.

Rule 2: Grant No Exceptions

With conflicts, systems aimed at 100% compliance are critical. Inevitably, it is that one representation that escaped the system that creates the most problems. Typically, the reasons for operating outside the conflicts process for one representation (the client is too important, the case is too complicated, the attorney is too rushed) are the same reasons the conflict analysis was so important for that representation. Hence, the single most important part of conflicts analysis is compliance without exception.

The challenge, then, is to address conflicts as painlessly as possible. The easier and faster the system is, the more likely it will be that every lawyer will “run conflicts” on every representation.

One last point on the “no exceptions” rule bears emphasis. Every new representation—even if it does not involve a new client—should be screened for conflicts. Conflicts screening should be done each time a new party becomes involved as a plaintiff, defendant, lender, buyer, or seller. Also note that, although computers make conflicts screening much easier, they are no substitute in the final conflicts analysis for involving lawyers in the process. Effective conflicts procedures involve both.

Spotting Actual and Potential Conflicts

Attorneys in Colorado must comply with Rules 1.7 and 1.8 of the Colorado Rules of Professional Conduct, which govern conflicts. There are two kinds of conflicts: actual conflicts and potential conflicts. The distinctions between each are worth noting.

Actual Conflicts

An actual conflict means that the conflict cannot be waived by disclosure or consent; the attorney simply cannot accept the representation. One type of actual conflict is direct adversity, which occurs when the needs of one client are directly adverse to the needs of another client. For example, a law firm cannot represent both a plaintiff and a defendant in the same lawsuit (although it has been tried). Effective conflicts systems identify direct adversity conflicts and make it impossible to open a matter when they arise.

Potential Conflicts

A potential conflict means that there is some issue that must be addressed before a lawyer can accept the representation. Typically, the issue is some form of consent or waiver from either the new client, another client, or a former client.

There are two types of potential conflicts: successive representations and multiple representations. Although they are different, the waiver is largely the same—full disclosure and consent. In both situations, the attorney must provide full disclosure to all of their clients and obtain their written consent before taking on the representation.

Successive representation. Successive representation conflict rules involve potential conflicts between a current (or prospective) client and a former client. Under the conflict rules, a lawyer cannot represent a new client in a matter substantially related to the representation of a former client without the former client’s consent after full disclosure.

Although there are many cases defining “substantially related,” the essence is whether the lawyer learned (or could have learned) confidential information from the old client that could be used in the new representation for the new client. If the answer is no—the lawyer did not and could not have learned confidences and secrets that could now be used—then the lawyer should be able to accept the new representation. If the answer is yes (and lawyers should assume the answer is yes when in doubt), then the lawyer should provide full disclosure to the former client and acquire his or her consent in writing before taking on the new representation.

Multiple representation. Multiple representation conflict rules involve potential conflicts arising out of the representation of more than one client. Many lawyers overcomplicate the analysis; it is actually pretty straightforward. If there is more than one client, then the multiple representation rules should be applied.

In most situations, the potential conflict is easy to spot—there is more than one client listed on the new matter form, so the rules have to be applied. However, sometimes the conflict is not so apparent. These situations can arise out of probate litigation (representing the executor, estate, and heirs); securities litigation (representing both the corporation and the directors/officers); domestic litigation (representing the parents and the children); and bankruptcies (representing multiple creditors).

Whenever there is more than one client, the lawyer should ask (1) Are there things I might do differently if I represented only one of the clients? and (2) Could changes down the road create adversity between the clients? If the answer to both questions is no, then there may be no conflict. Depending on the circumstances, the attorney may be able to accept the representation without further investigation. If the answer to either question is yes, then there is a potential conflict that requires a more thorough analysis. This analysis involves determining whether the lawyer can adequately represent the interests of all of the clients. If the answer to this question is no, then there is an actual conflict.

A simple way to establish whether there is an actual conflict is to determine if the clients’ interests are linked in any way. In a contested divorce proceeding, for example, no lawyer could advance one spouse’s interests without impacting the interests of the other spouse. Therefore, the representation of a wife and husband in a contested divorce proceeding is not permissible with or without consent.

Conclusion

Conflicts do not have to be complicated. They just require practice discipline and proper analysis. Before the representation begins, get the names and run the conflicts. Adopt the mantra “Just Do It!”


Note

[1] See People v. Layton, No. 13PDJ036 (PDJ Sept. 25, 2013) (suspending an attorney in part due to violation of Colo. RPC 1.8(e), which prohibits an attorney from providing financial assistance to a client involved in pending litigation).

Randy Evans is an author, litigator, columnist and expert in the areas of professional liability, insurance, commercial litigation, entertainment, ethics, and lawyer’s law. He has authored and co-authored eight books, including: The Lawyer’s Handbook; Georgia Legal Malpractice Law; Climate Change And Insurance; Georgia Property and Liability Insurance Law; Appraisal In Property Damage Insurance Disputes; and California Legal Malpractice Law. He writes newspaper columns (the Atlanta Business Chronicle, the Recorder, and the Daily Report) and lectures around the world. He served as counsel to the Speakers of the 104th – 109th Congresses of the United States. He co-chairs the Georgia Judicial Nominating Commission. He serves on the Board of Governors of the State Bar of Georgia. He handles complex litigation throughout the world. He has been consistently rated as one of the Best Lawyers in America, Super Lawyer (District of Columbia and Georgia), Georgia’s Most Influential Attorneys, and Georgia’s Top Lawyers for Legal Leaders. Along with numerous other awards he has been named the “Complex Litigation Attorney of the Year in Georgia” by Corporate International Magazine, and Lawyer of the Year for Legal Malpractice Defense in Atlanta. He is AV rated by Martindale Hubble.

Shari Klevens is a partner in the Atlanta and Washington, D.C. offices of McKenna Long & Aldridge LLP. Shari represents lawyers and law firms in the defense of legal malpractice claims and advises and counsels lawyers concerning allegations of malpractice, ethical violations, and breaches of duty. In addition, Shari is the Chair of the McKenna’s Law Firm Defense and Risk Management Practice and is a frequent writer and lecturer on issues related to legal malpractice and ethics. Shari co-authored Georgia Legal Malpractice Law and California Legal Malpractice Law, which address the intricacies and nuances of Legal Malpractice law and issues that confront the new millennium lawyer. She also co-authored The Lawyer’s Handbook: Ethics Compliance and Claim Avoidance, which is an easy-to-use desk reference offering practical solutions to real problems in the modern law practice for every attorney throughout the United States.

Lino Lipinsky de Orlov is a litigation partner in the Denver office of McKenna Long & Aldridge, LLP.  He represents clients in all aspects of commercial litigation, mediation, arbitration, and appeals.  He has developed particular experience in complex business cases, particularly those involving creditor’s rights, real estate, trade secrets, and employment disputes.  Mr. Lipinsky also frequently speaks and writes on legal issues relating to technology, employment law, and ethics.   He is a member of the Colorado Bar Association’s Board of Governors and serves on the Board of the Colorado Judicial Institute.  He is a former President of the Faculty of Federal Advocates.  Among his honors, Chambers USA has recognized Mr. Lipinsky as one of Colorado’s leading general commercial litigators, and he has been included in The Best Lawyers in America.  He received his A.B. degree, magna cum laude, from Brown University and his J.D. degree from New York University School of Law, where he was a member of the New York University Law Review.

 

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

Hon. J. Mark Hannen to Retire from 18th Judicial District Court

On Monday, April 6, 2015, the Colorado State Judicial Branch announced the retirement of Hon. J. Mark Hannen from the district court for the Eighteenth Judicial District, effective July 1, 2015.

Judge Hannen was appointed to the district court bench in 2002. Prior to his appointment, he had been the Douglas County Attorney since 1989. He has practiced law at many firms, emphasizing civil litigation, real estate, commercial transactions, and local government law. He received many awards for professionalism, competence, and pro bono work while in private practice. He received his undergraduate degree from the University of Notre Dame, magna cum laude, and his law degree from the University of Denver College of Law.

Applications are now being accepted for the vacancy on the Eighteenth Judicial District Court bench. Eligible applicants must be qualified electors of the Eighteenth Judicial District and must have been admitted to practice law for five years. Application forms are available from the State Judicial website and also from Justice Brian Boatright, the ex officio chair of the Eighteenth Judicial District Judicial Nominating Commission. Applications must be received no later than 4 p.m. on May 6, 2015, and anyone wishing to nominate another must do so no later than 4 p.m. on April 29, 2015.

For more information about the vacancy, and for contact information for members of the judicial nominating commission, click here.

Colorado Supreme Court: Attorney Did Not Violate Rule 1.16(d) Where Some of Non-Returned Flat Fee was Earned

The Colorado Supreme Court issued its opinion in In the Matter of Juliet Carol Gilbert on Monday, April 6, 2015.

Attorney Discipline—Quantum Meruit—Colo. RPC 1.16(d).

In this attorney discipline proceeding, the Supreme Court considered whether an attorney violated Colo. RPC 1.16(d) by failing to return all of an advance fee to her clients. Colo. RPC 1.16(d) requires attorneys to refund upon termination by a client any advance payment of fee that “has not been earned.”

In this case, the attorney’s flat fee agreement did not describe what payment, if any, the clients would owe the attorney if the representation ended early. The Hearing Board determined that the attorney had earned part of the advance fee under a quantum meruit theory by performing services for the clients, and that she did not violate the ethical rules by retaining this amount after her discharge.

The Supreme Court affirmed the Hearing Board’s order. Under the facts of this case, the attorney did not violate Colo. RPC 1.16(d) by failing to return the portion of an advance fee to which she was entitled in quantum meruit for services rendered for her clients.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Supreme Court: Statutory Deadline for Water Right Abandonment List Non-Jurisdictional

The Colorado Supreme Court issued its opinion in Concerning the Protest of Tom McKenna and McKenna Ranch to the Revised Abandonment List of Water Rights in Water Division No. 2: McKenna v. Witte on Monday, April 6, 2015.

Water Court’s Jurisdiction—Abandonment.

This case was a direct appeal from a water court judgment that decreed three of the appellants’ water rights abandoned. The appellants challenged the water court’s jurisdiction to enter the judgment, based on the Division Engineer’s six-day delay in preparing the decennial abandonment list, as required by CRS § 37-92-401(1)(a), and asserted that there was insufficient evidence to support a judgment of abandonment.

The Supreme Court held that the deadline to prepare the abandonment list under CRS § 37-92-401(1)(a) is directional and is not a jurisdictional mandate. Thus, the Division Engineer’s failure to prepare the abandonment list by the statutory deadline did not divest the water court of jurisdiction over the case. Further, the Court declined to overturn the water court’s determination of abandonment because the record supports the conclusion that the appellants intended to permanently discontinue their use of the three water rights. The judgment was affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Supreme Court: Court of Appeals Had Jurisdiction to Entertain Expedited Bond Revocation Appeal

The Colorado Supreme Court issued its opinion in In re People v. Jones on Monday, April 6, 2015.

Appeal of Bail Bond Orders—Conditions of Bail Bond.

Jones petitioned for relief pursuant to CAR 21 from a district court order granting the prosecution’s motion to revoke his bail bond in its entirety and order that he be held without bond pending resolution of charges in a different district. The district court reasoned that it was granted the power to do so by CRS § 16-4-105(3), upon concluding that another court had found probable cause to believe Jones committed a felony while released on bond. Jones appealed to the court of appeals according to the expedited procedure of CRS § 16-4-204, but that court found itself to be without jurisdiction to entertain an expedited appeal from an order entered pursuant to CRS § 16-4-105(3).

The Supreme Court held that the court of appeals erred in concluding that it lacked jurisdiction to entertain Jones’s appeal. Colorado’s statutory scheme governing release on bail entitled Jones to an expedited review of the district court’s order revoking his existing bond and declining to set another pending trial.

The Court further held that the district court erred in revoking Jones’s existing bond and denying him a right to pretrial release altogether. CRS § 16-4-105(3) merely empowered the district court to have Jones brought before it for purposes of modifying the conditions of his pretrial release.

The rule was made absolute. The matter was remanded to the district court with directions to reinstate Jones’s bail bond or change any condition of the bond, as authorized by statute.

Summary and full case available here, courtesy of The Colorado Lawyer.

Tenth Circuit: Unpublished Opinions, 4/7/2015

On Tuesday, April 7, 2015, the Tenth Circuit Court of Appeals issued one published opinion and three unpublished opinions.

Duran v. Janecka

United States v. McKern

Matthews v. Pennsylvania Life Insurance

Case summaries are not provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.