What is a Legal Conflict of Interest?
WHAT IS A CONFLICT OF INTEREST?
In the context of lawyers and legal relationships, a conflict of interest exists when a lawyer’s duty to a client would require the lawyer to take action that is contrary to or would prejudice to the interests of the lawyer, another client, or someone else to whom the lawyer owes a specific type of legal duty.
Put simply, conflicts of interest arise when a lawyer has two different duties (which the law calls “interests” in this situation) that are contrary or opposed to one another (i.e., “in conflict”).
California case law describes a conflict of interest as a situation where, in a given case, there is “a substantial risk that the lawyer’s representation of the client would be materially and adversely affected by the lawyer’s own interests or by the lawyer’s duties to another current client, a former client, or a third person.” Sharp v. Next Entertainment, Inc. (2008) 163 CA4th 410, 426, 78 CR3d 37, 50.
WHAT IS THE PROBLEM WITH CONFLICTS OF INTEREST?
Lawyers have specific, legally-mandated duties to their clients, including:
— a duty to provide competent representation
— a duty of undivided loyalty
— a duty of confidentiality
— a duty to exercise independent judgment
— a to communicate with the client
Conflicts of interest create very real, serious risks that a lawyer will be unable to, or choose not to, fulfill these vital duties. For example, if a lawyer owns stock in a public company, and a potential client wants to the lawyer to pursue a legal claim against the company that, if successful, could result in significant damage to the company’s financial status and reputation, there is a conflict between the lawyer’s own financial interests (i.e., as a shareholder of the company) and the client’s interests (in recovering on the claim).
It’s easy to see how this hypothetical situation could harm or threaten the lawyer’s ability to fulfill the legal duties described above.
As a stockholder with a financial interest in the (defendant) company, it might be difficult for the lawyer to provide competent, zealous representation of the client. Certainly, the lawyer’s financial interest in the defendant company would impact, and likely divide, the lawyer’s loyalty to the plaintiff client–and might also damage the lawyer’s ability to communicate with the client, especially when it comes to making a full disclosure of the lawyer’s interest in the defendant company. In addition, the lawyer might be tempted to share information with the company in inappropriate ways, for example, to try and settle the matter quietly, before the company loses too much value. These are only a few examples, but it’s easy to see how problems could arise.
When this type of situation arises, the lawyer has a conflict of interest and generally should not accept the case.
CAN LAWYERS REPRESENT CLIENTS WHERE CONFLICTS OF INTEREST EXIST?
Sometimes–but not always.
In some cases, a conflict of interest can be waived–essentially, dismissed or overruled–by the client (or the client and the third party whose interests are involved in the conflict). However, waivers of conflicts of interest must be performed in very specific ways, and in accordance with ethics rules and other legal rules.
Some conflicts of interest cannot be waived, and in those cases a lawyer is forbidden to take on, or continue handling, a given case.
DO I HAVE TO SIGN A CONFLICT WAIVER IF A LAWYER ASKS?
The decision whether or not to waive a conflict of interest is a decision for the client alone, at the client’s own discretion. A lawyer should never try to pressure you or persuade you waive a conflict of interest. In fact, you have the right to get a second opinion about a conflict waiver before you agree to it, and before you sign any waiver forms. In many cases, it’s smart to get a second opinion, to ensure you have a proper understanding of your rights, and of the rights you give up by signing a conflict waiver.
Disclaimer: THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY, AND DOES NOT CONSTITUTE LEGAL ADVICE OR CREATE AN ATTORNEY-CLIENT RELATIONSHIP BETWEEN THE AUTHOR OR ROSS LAW AND ANY PERSON. Your legal rights and experiences may vary. Never use an online article (including this one) to evaluate your legal rights or claims. Consult an experienced attorney promptly to obtain a personalized evaluation of your claims, potential damages, and the various legal rights and options available to you.
You may lose or compromise your rights if you delay in consulting legal counsel. Most legal claims (and defenses), as well as legal and court procedures, are complicated and fact-dependent. If you believe you have a claim against someone who injured you, a lawyer who represented you in a previous lawsuit, or any other legal claim, consult an experienced lawyer immediately for an evaluation of your individual rights and claims.