Wisconsin Lawyer
Vol. 82, No. 7, July 2009
Part of practicing law is dealing with conflicts, and dealing with conflicts means dealing with conflict waivers. Lawyers must understand not only how to identify and analyze conflicts but also how to draft an effective waiver. The lawyer who fails to draft an effective waiver runs the risk of professional discipline, disqualification, loss of fees, and malpractice actions. On the other hand, an effective conflict waiver can be a lawyer’s most effective tool in defending against any of these actions. The difference, for example, between defeating a malpractice action on summary judgment and proceeding to trial can be a carefully drafted conflict waiver.
Waivers, however, should not be viewed as simply an exercise in self-protection for lawyers, because the process of drafting, discussing, and obtaining client consent to a waiver benefits both lawyers and clients. Lawyers owe a duty of loyalty to clients, and the existence of a conflict means that the duty is impaired. Consequently, the client’s decision to waive a conflict is important, and taking the time to discuss, review, and sign a waiver letter emphasizes the importance of the decision for the client.1 The process of drafting a waiver letter also forces the lawyer to take a hard look at the conflict and consider whether it is wise to continue the representation. If putting the facts of the conflict and the risks of waiver in writing is uncomfortable, that is a message worth heeding. Waiver letters force clients and lawyers alike to think about what they are doing.
As ethics counsel for the State Bar of Wisconsin, I discuss conflict questions with lawyers every day, and I’m frequently asked what sort of information should be in a conflict waiver. The purpose of this article is to provide a written reference for Wisconsin lawyers when they are considering this question. As with most legal topics, it is not possible to provide a comprehensive discussion in the space of a magazine article. Instead, this article discusses the types of information that must normally be included in a waiver and provides a framework for thinking about the issue.
Because of the fact-specific nature of conflicts, it is simply not possible to create a form conflict waiver. Nevertheless, some simple, sample conflict waivers are appended to this article. These samples merely reflect the author’s thoughts as to what might be appropriate language in certain circumstances. They are not “plug and play” waiver forms. Each conflict waiver must be tailored to meet specific circumstances, and any lawyer who attempts to rely solely on a form waiver does so at his or her peril. These samples also are not approved by any court or the Office of Lawyer Regulation.
For space reasons, this article discusses only what sort of information must be in a conflict waiver to meet the informed-consent standard; it does not address other topics such as identification of conflicts and analysis of whether a conflict, once identified, is waivable. The information contained here applies only once a lawyer has identified a conflict and determined that it is waivable.
Background
On July 1, 2007, the Wisconsin Supreme Court adopted revised Rules of Professional Conduct for Attorneys (the “Rules”). As part of those revisions, informed consent replaced consent after consultation as the standard lawyers must meet when seeking important decisions from clients in certain circumstances, including the decision whether to waive a conflict. To draft a conflict waiver that meets the Rule requirements, a lawyer must understand the informed-consent standard.2
In the 2007 revisions the supreme court also retained Wisconsin’s requirement that conflict waivers be in writing and be signed by each affected client.3 In Wisconsin, an effective conflict waiver requires three things: 1) it must be written; 2) it must be signed by the affected client or former client;4 and 3) it must meet the informed-consent standard. The remainder of this article discusses these three elements.
Conflict Waivers Must Be in Writing and Signed
These requirements would seem to be self-evident and require no discussion. Both the terms writing and signed are specifically defined by the Rules, however, and these definitions are worth noting. SCR 20:1.0(q) defines writing as follows:
“‘Writing’ or ‘written’ denotes a tangible or electronic record of a communication or representation, including handwriting, typewriting, printing, photostating, photography, audio or videorecording and e-mail. A ‘signed’ writing includes an electronic sound, symbol or process attached to or logically associated with a writing and executed or adopted by a person with the intent to sign the writing.”
Therefore, in situations requiring a client’s informed consent confirmed in a writing signed by the client, such as with conflict waivers, the written confirmation and signature need not be in the form of a letter signed by the client – it can be by email or even voicemail. Some media, however, present problems of preservation and documentation of the lawyer’s communication to the client, so be cautious – it would be at best foolish to rely solely on voicemail as evidence of a written and signed conflict waiver.
The Informed-Consent Standard
When seeking a waiver of a conflict from a current or former client, the burden is on the lawyer to communicate sufficient information so that the client’s consent meets the informed-consent standard. SCR 20:1.0(f) defines informed consent as follows:
“‘Informed consent’ denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.”
The Comment, paragraph [6], to SCR 20:1.0(f) states as follows:
“[6] Many of the Rules of Professional Conduct require the lawyer to obtain the informed consent of a client or other person (e.g., a former client or, under certain circumstances, a prospective client) before accepting or continuing representation or pursuing a course of conduct. See, e.g., Rules 1.2(c), 1.6(a) and 1.7(b). The communication necessary to obtain such consent will vary according to the Rule involved and the circumstances giving rise to the need to obtain informed consent. The lawyer must make reasonable efforts to ensure that the client or other person possesses information reasonably adequate to make an informed decision. Ordinarily, this will require communication that includes a disclosure of the facts and circumstances giving rise to the situation, any explanation reasonably necessary to inform the client or other person of the material advantages and disadvantages of the proposed course of conduct and a discussion of the client’s or other person’s options and alternatives. In some circumstances it may be appropriate for a lawyer to advise a client or other person to seek the advice of other counsel. A lawyer need not inform a client or other person of facts or implications already known to the client or other person; nevertheless, a lawyer who does not personally inform the client or other person assumes the risk that the client or other person is inadequately informed and the consent is invalid. In determining whether the information and explanation provided are reasonably adequate, relevant factors include whether the client or other person is experienced in legal matters generally and in making decisions of the type involved, and whether the client or other person is independently represented by other counsel in giving the consent. Normally, such persons need less information and explanation than others, and generally a client or other person who is independently represented by other counsel in giving the consent should be assumed to have given informed consent.”
Timothy J. Pierce, U.W. 1992, is the State Bar ethics counsel. Members can contact him for informal guidance and help in resolving questions regarding Wisconsin’s Rules of Professional Conduct for Attorneys, at tpierce@wisbar.org; (608) 250-6168 or (800) 444-9404, ext. 6168, Monday through Friday, 9 a.m. to 5 p.m.
The Rule and accompanying Comment broadly outline the type of information that is necessary to meet the informed-consent standard, but no degree of specificity is explicitly required. SCR 20:1.0(f) requires “adequate information and explanation” and notes that the amount of information is dependent on specific circumstances. The Comment also suggests that less sophisticated clients who are not independently represented require more thorough explanations. Thus, relatively sophisticated clients might require only a brief description of the circumstances and attendant risks, but inexperienced users of legal services require a more thorough explanation. Lawyers should be cautious, however, about relying on a client’s seeming sophistication. A client may be very sophisticated about the client’s own business, but this does not mean that the client is sophisticated about legal matters. Sophistication, as that term is used here, means legal sophistication, and it is always better to offer more explanation than might be needed than not enough. Also, because waivers are usually written for nonlawyers, avoid legalese. Pasting the text of a Rule into a waiver as an explanation of the conflict will mean little to most clients.
The Comment further suggests that independently represented clients should be assumed to have had the benefit of advice from counsel in giving consent and that, in some circumstances, the lawyer should advise a client or former client to seek the advice of such counsel. Thus, while SCR 20:1.0(f) and its Comment do not provide guidance on the precise information that must be provided to the client or former client, they note that the amount of information depends on the particular client. An independently represented client with a high degree of legal sophistication, such as a corporation with in-house counsel, does not require the same degree of information as an unrepresented individual with no previous experience in the legal system. Good risk management, however, dictates erring on the side of providing more rather than less information to any client. A lawyer doesn’t risk discipline or malpractice liability for providing too much information to a sophisticated client.
In looking for further explanation of the standard, little help lies in case law. No Wisconsin case discusses SCR 20:1.0(f), which is unsurprising given the Rule’s recent vintage. Wisconsin courts have addressed the issue of the adequacy of conflict waivers in general in a few cases. The Wisconsin Supreme Court has stated:
“Full disclosure contemplated by the conflict of interest provisions of the lawyer ethics code requires far more than merely the client’s awareness of facts that may create or suggest a conflict of interest. The disclosure must be sufficient to inform the client of possible adverse effects the conflicting interests of the lawyer or of others might have on the lawyer’s representation of the client.”5
The Wisconsin Court of Appeals has held:
“An effective waiver of a conflict or potential conflict of interest which is knowing and voluntary requires the lawyer to disclose the following: (1) the existence of all conflicts or potential conflicts in the representation; (2) the nature of the conflicts or potential conflicts, in relationship to the lawyer’s representation of the client’s interests; and (3) that the exercise of the lawyer’s independent professional judgment could be affected by the lawyer’s own interests or those of another client. On the part of the client, it also requires: (1) an understanding of the conflicts or potential conflicts and how they could affect the lawyer’s representation of the client; (2) an understanding of the risks inherent in the dual representation then under consideration; and (3) the ability to choose other representation. See State v. Cobbs, 221 Wis. 2d 101, 105-06, 584 N.W.2d 709, 710 (Ct. App. 1998); Kaye, 106 Wis. 2d at 14-16, 315 N.W.2d at 342-43; SCR 20:1.7.”6
Both of the above referenced cases were decided under the old Rules, which required that clients give “consent after consultation,” which was a more lenient standard than informed consent. Even under the old, more lenient standard, however, Wisconsin courts emphasized that a client’s mere awareness of and consent to a conflict does not suffice – the lawyer also must explain the conflict’s implications, particularly the risks to the client. A waiver that simply states that the lawyer told the client of the existence of a conflict and the client waived it would not have been enough even before the informed-consent standard was adopted.
Looking beyond case law, the Restatement (Third) of the Law Governing Lawyers (the “Restatement”)7 defines informed consent to a waiver of a conflict in §122 as requiring “that the client or former client have reasonably adequate information about the material risks of such representation to that client or former client.” Thus the Restatement, like the Wisconsin Supreme Court in Forester and the definition of informed consent found in SCR 20:1.0(f), emphasizes the necessity of informing the client of the risks of agreeing to waive a conflict.
The above discussed sources indicate that informed consent has three essential elements:
1) Explanation of facts and circumstances. In the context of a conflict waiver, this would normally involve an explanation of what the conflict is and why it is a conflict. For example:
• In the case of a concurrent conflict arising from a lawyer’s representation of one client against another client that the lawyer represents in an unrelated matter, the lawyer must clearly explain to the affected clients that the lawyer is representing an adverse party against the client in an unrelated matter and that this creates a conflict because the lawyer’s duty of loyalty to the client would normally preclude taking any positions adverse to the client, even on unrelated matters.
• In the case of a former-client conflict, the lawyer should identify the matter in which the lawyer represented the former client and state that the lawyer now represents a different client whose interests are adverse to the former client in a related matter, and that this creates a conflict.
• In the case of a material-limitation conflict, such as when joint clients may have claims against each other of small value, which the clients have chosen to forego for the benefits of joint representation, the lawyer should explain that he or she is precluded from advising or assisting the client in pursuing a certain course of action (the foregone claims), and that this creates a conflict because the lawyer’s ability to represent the client is limited by such restrictions.
2) An explanation of the material risks and disadvantages of agreeing to the proposed course of conduct. This is perhaps the most important aspect of informed consent and the most difficult for lawyers. It means that the lawyer must explain in plain language the downside to the client(s) of agreeing to the waiver, or, as described by one court, the lawyer must describe the nature of the conflict in such detail that the affected client(s) can understand why it may be desirable to withhold that consent.8 Put another way, the lawyer should point out the risks to the client that the lawyer would point out if the lawyer had been retained specifically for that purpose.9 It is understandably uncomfortable for the lawyer seeking the waiver of a conflict to tell the person why it might be a bad idea to give the very consent the lawyer is seeking. Nonetheless, the Rules require it, and doing so benefits the lawyer by making the lawyer think hard about what is being asked.
The types of material risks posed to affected clients vary from case to case. For example:
• There may be little risk to clients that are affected by a concurrent conflict of interest in connection with unrelated matters, and so a general description of the respective representations and the work involved should suffice. If necessary, however, it should be made plain that the firm may have confidential information that may be relevant to the client’s adversary in the unrelated matter and what, if any, steps the firm is taking to protect that information.
• In seeking a waiver for a former-client conflict, §122, comment c(i) of the Restatement provides guidance:
“When the consent relates to a former-client conflict (see § 132), it is necessary that the former client be aware that the consent will allow the former lawyer to proceed adversely to the former client. Beyond that, the former client must have adequate information about the implications (if not readily apparent) of the adverse representation, the fact that the lawyer possesses the former client’s confidential information, the measures that the former lawyer might undertake to protect against unwarranted disclosures, and the right of the former client to refuse consent.”
Because the basis of former-client conflicts is the fact that the lawyer is irrebuttably presumed to have relevant confidential information about the former client when matters are substantially related,10 the lawyer should normally explain that the lawyer is now taking a position adverse to the former client in a matter in which information relating to the prior representation may be relevant and useful to the former client’s present adversary.11
• Multiple representation brings special considerations. Restatement §122, comment c(i) provides useful information:
“In a multiple-client situation, the information normally should address the interests of the lawyer and other client giving rise to the conflict; contingent, optional, and tactical considerations and alternative courses of action that would be foreclosed or made less readily available by the conflict; the effect of the representation or the process of obtaining other clients’ informed consent upon confidential information of the client; any material reservations that a disinterested lawyer might reasonably harbor about the arrangement if such a lawyer were representing only the client being advised; and the consequences and effects of a future withdrawal of consent by any client, including, if relevant, the fact that the lawyer would withdraw from representing all clients.”
Paragraphs [30] and [31] of the Comment to SCR 20:1.7 (Concurrent Conflicts of Interest) provide further guidance:
“[30] A particularly important factor in determining the appropriateness of common representation is the effect on client-lawyer confidentiality and the attorney-client privilege. With regard to the attorney-client privilege, the prevailing rule is that, as between commonly represented clients, the privilege does not attach. Hence, it must be assumed that if litigation eventuates between the clients, the privilege will not protect any such communications, and the clients should be so advised.
“[31] As to the duty of confidentiality, continued common representation will almost certainly be inadequate if one client asks the lawyer not to disclose to the other client information relevant to the common representation. This is so because the lawyer has an equal duty of loyalty to each client, and each client has the right to be informed of anything bearing on the representation that might affect that client’s interests and the right to expect that the lawyer will use that information to that client’s benefit. See Rule 1.4. The lawyer should, at the outset of the common representation and as part of the process of obtaining each client’s informed consent, advise each client that information will be shared and that the lawyer will have to withdraw if one client decides that some matter material to the representation should be kept from the other.”
Thus, in most multiple-representation situations, a conflict waiver should, at a minimum, discuss the following:
a) The effect of multiple representation on the clients. This normally would include a discussion of options and alternatives foregone because of the joint representation, such as the fact that the lawyer cannot pursue claims on behalf of one client against another. In a transactional matter, the lawyer will need to explain that he or she cannot take on an advocacy role among the clients, such as bargaining for better terms for one client to the disadvantage of another.
b) The effect on attorney-privilege. Clients must normally be warned that they will likely not be able to invoke the attorney-client privilege in the event of a future legal dispute between former joint clients.
c) Confidentiality. Clients must be informed that the lawyer cannot keep material information secret from any of the joint clients. If one client insists on such secrecy, it will likely create an irreconcilable conflict for the lawyer.
d) Future withdrawal. The waiver should also discuss the possibility that circumstances may change and perhaps render what was a waivable conflict unwaivable, thus causing each client to bear the expense of retaining new counsel.
e) Any other reasonably foreseeable risks.
In considering what other risks might arise, Arizona Ethics Opinion 07-04 (2007) provides some guidance.12 In that opinion, the State Bar of Arizona Ethics Committee considered a proposed conflict waiver for a multiple representation and offered the following guidance, which while discussing Arizona law, is still useful in commenting on general principles that are relevant for Wisconsin lawyers:
“(1) Conflicting Testimony. The implications of testimonial conflicts among jointly represented parties is addressed in Sellers v. Superior Court, where the defendants had all consented in advance to the joint representation, with knowledge of testimonial conflicts, yet an argument was made in the context of a motion for disqualification that those conflicts presented an ‘untenable’ conflict at the outset on the facts of that case. Although the inquiring lawyer’s consent form appropriately identifies the potential for testimonial and other conflicts, it may be prudent to provide further explanation on how such testimonial conflicts could negatively impact the claims of each individual client, assuming that was not done orally. Sellers, 154 Ariz. at 287, 742 P.2d at 298 (on remand following disqualification order, trial court should consider whether the ER 1.7 disclosure ‘encompass[ed] the divergence of interest among defendants and the potential significance of their testimonial disparities’). Furthermore, any known testimonial conflicts should be evaluated to determine whether the conflict is ‘consentable.’
“(2) Conflicting Settlement Positions. The consent form appropriately discloses that there may be conflicts among clients with respect to settlement, including that ‘there may be different possibilities of settlements of the claims.’ It recites the clients’ understanding that ‘a lump sum settlement offer to all plaintiffs’ is ‘not permissible,’ that the law firm may reject such an offer and demand individual settlement offers, and that each plaintiff is free to accept or reject its individual settlement offer. This opinion assumes that the inquiring lawyer, in discussing the topic of settlement, orally discussed the advantages and disadvantages of the various settlement approaches, including the possible disadvantages of requiring individual offers (as opposed to aggregate offers). Additionally, because individual offers are being required, it should also be made clear to each client that information on the individual settlement offer it receives, and any response thereto, cannot be kept confidential from the other jointly represented plaintiffs. See ER 1.8, cmt 13 (noting that ER 1.8 is a corollary of ER 1.7 and requires that ‘before any settlement offer ... is made or accepted on behalf of multiple clients, the lawyer must inform each of them about all the material terms of the settlement, including what the other clients will receive or pay if the settlement ... is accepted’); see also ABA Formal Op. 06-438 (Feb. 10, 2006) (with respect to aggregate settlement offers under ER 1.8, lawyer must provide each client with detailed information on every other client’s participation in the proposed settlement, along with explanation of how costs will be allocated).[5]”
• Advance, or prospective, conflict waivers, like those in multiple-representation situations, require special care.13 Such waivers are not explicitly prohibited by the Rules, but, like all conflict waivers, must meet the informed consent standard. Thus, difficulty arises both in describing an as yet unknown conflict and in describing the material risks to the client in sufficient detail. Paragraph [22] of the Comment to SCR 20:1.7 discusses relevant considerations:
“[22] Whether a lawyer may properly request a client to waive conflicts that might arise in the future is subject to the test of paragraph (b). The effectiveness of such waivers is generally determined by the extent to which the client reasonably understands the material risks that the waiver entails. The more comprehensive the explanation of the types of future representations that might arise and the actual and reasonably foreseeable adverse consequences of those representations, the greater the likelihood that the client will have the requisite understanding. Thus, if the client agrees to consent to a particular type of conflict with which the client is already familiar, then the consent ordinarily will be effective with regard to that type of conflict. If the consent is general and open-ended, then the consent ordinarily will be ineffective, because it is not reasonably likely that the client will have understood the material risks involved. On the other hand, if the client is an experienced user of the legal services involved and is reasonably informed regarding the risk that a conflict may arise, such consent is more likely to be effective, particularly if, e.g., the client is independently represented by other counsel in giving consent and the consent is limited to future conflicts unrelated to the subject of the representation. In any case, advance consent cannot be effective if the circumstances that materialize in the future are such as would make the conflict nonconsentable under paragraph (b).”
The Comments to SCR 20:1.7 place considerable importance on the relative legal sophistication of the client asked to give advance consent to a conflict and whether the client had access to independent legal counsel in making the decision.14 An independently represented sophisticated client is much more likely to have a full appreciation of the risks involved in signing such a waiver.
Courts considering the validity of advance waivers usually place considerable weight on these factors but also tend to uphold waivers that are able to specifically identify potential matters in which conflicts may arise, as opposed to general, open-ended advance waivers.15 Thus, when considering drafting an advance conflict waiver, the lawyer should strive to be a precise as possible with respect to the anticipated future conflict or conflicts.
3) An explanation of available options and alternatives. This final element of obtaining informed consent in the context of a conflict waiver is normally fairly straightforward and would typically involve simply explaining that the client, or former client, has a right to withhold consent and that such a decision would preclude the lawyer’s involvement in the matter.
Renewed Consent
In considering the adequacy of a waiver, the lawyer must bear in mind that material facts sometimes change and render an already executed conflict waiver outdated. In such circumstances, the lawyer must decide whether the changes render a once waivable conflict unwaivable. If still waivable, the lawyer must draft a waiver to reflect the changed circumstances and obtain the clients’ signatures.
Summary
When drafting a conflict waiver, a lawyer must be mindful of the particular current or former client and focus on conveying adequate information to enable that specific client to understand the three elements discussed above. For a typical case, the lawyer should be sure to describe, in writing, the fact of and nature of the conflict, the risks or downside to the client of agreeing to waive the conflict, and the fact that the client has the option of declining to give the requested consent.
Endnotes
Wisconsin Lawyer
