Waivers of Future Conflicts of Interest May Be Valid

by Dean R. Dietrich

Question

Our firm has been asked to defend a company in an environmental matter. We would like to ask this company to waive any future conflicts of interest if we are asked to sue the company by another client. Can the company agree to this waiver of conflict?

Answer

Waivers of future conflicts of interest is an item being discussed and used on a limited basis by large law firms throughout the country. Very few state ethics committees have rendered opinions as to whether clients may waive future conflicts of interest.

There are significant questions as to whether a waiver of this type would be considered reasonable and knowing. Much will depend on the exact circumstances involved. The New York County Lawyers Association issued an opinion in 1998 that acknowledged the possibility of a waiver of a future conflict of interest, but suggested that several conditions must be met. NYCLA Ethics Opinion No. 724. The New York County Lawyers Association summarized its opinion about a client waiving a future (and unknown) conflict of interest by stating:

"A lawyer can seek and a client or prospective client can give an advance waiver with respect to conflicts of interest that may arise in the future. The lawyer must first evaluate whether the future representation is likely to give rise to a nonconsentable conflict. If the lawyer determines that the prospective conflict is consentable, he or she can proceed to make full disclosure to the client or prospective client and obtain that person or entity's consent. The validity of the waiver will depend on the adequacy of disclosure given to the client or prospective client under the circumstances, taking into account the sophistication and capacity of the person or entity giving consent."

In Wisconsin, the provisions of SCR 20:1.7 and 1.9 do not directly envision the waiver of a future and unknown conflict of interest. Our Supreme Court Rules do acknowledge that a client may waive a conflict of interest, but each waiver will depend upon the specific circumstances involved and requires consultation between the lawyer and client. Thus, there is a question whether the waiver of a future conflict, when the exact nature of the conflict is unknown and may not be identified, could be made by a client because of the lack of specificity of the facts and circumstances of the conflict. In the terminology section of Chapter 20, the word "consultation" is defined as "communication of information reasonably sufficient to permit the client to appreciate the significance of the matter in question." Again, the exact circumstances of a specific request to waive a future conflict of interest will depend upon the ability to meet this definition.

The American Bar Association Ethics 2000 Commission Draft Report acknowledges the concept of waiver of future conflicts in its proposal to modify ABA Model Rule 1.7. In the commentary to its proposed rule amendment, the commission stated:

"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 often determined by the extent to which the client reasonably understands the material risks that the waiver entails. If the consent is general and open-ended (i.e., the client agrees to consent to any future conflict that might arise), then the consent ordinarily will be ineffective, because it is not reasonably likely that the client will have understood the material risks involved. If, however, the client is independently represented by other counsel in giving consent, such a waiver is more likely to be effective. On the other hand, if the client is a sophisticated user of the legal services involved and agrees to consent to a particular type of conflict with which the client is already familiar, then the consent should be effective with regard to that type of conflict. For example, a bank that hires a lawyer to defend it in litigation might be willing to agree in advance to have the lawyer represent borrowers in loan transactions with that same bank, but not in resisting collection proceedings brought by the bank. 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. The validity of the client's consent must be determined not only at the time it is first given but also at the time the waiver is sought to be implemented to determine if the circumstances at the time of the conflict are what were earlier expected."

If a lawyer follows the considerations identified in the commentary to the proposed model rule, a strong case can be made that the client has made a valid waiver of a future conflict of interest based upon the consultation that has occurred between the lawyer and the client. The lawyer must take special caution, however, to ensure that the client clearly understands the waiver of a future conflict in order to avoid a problem when and if the future conflict arises.

Wisconsin Lawyer