Conflict of Interest – What is it, and why Do Lawyers Worry About It? Two Interested kids continued.

Since it was still summer, the two youngsters frequently started every day at the Mesa, Arizona Park, near their homes. They started each day swing on the swings, chatting and trying to come up with ideas to fill the day. One of the things they still enjoyed doing was visiting the old man who called himself a lawyer.

Occasionally, they visited nearby communities like Gilbert, Chandler, Queen Creek, and Apache Junction to shop or see family and friends. Sometimes, they even traveled to Phoenix but preferred returning home to Mesa. One of the boys said, “There really isn’t anything to do today, I wonder if the old man is by the pool?”

“Let’s go see!”

They jumped off the swings and raced across the park. When they reached the retirement home, they were not surprised to see the old man sitting there, eyes closed, soaking in the sun.

As they approached, the old man opened his eyes and squinted in their direction. He had heard them coming, and when they got close enough to recognize, he smiled, happy to have company. and knew they would ask him more questions about his career as a lawyer. They were the most inquisitive boys he had ever met, and he was fond of them.

“Yes, boys. What is it you want to know about my past today?”

“Nothing … except, the other day, you mentioned something called ‘Interesting Conflict.’ I didn’t understand what you meant, so I looked up ‘conflict’ in the dictionary. It said conflict is two people or two countries fighting, like maybe a war. I didn’t think you were talking about wars. What were you referring to?”

The retired lawyer chuckled, charmed by their curiosity. He explained that he spoke about the phrase “Conflict of Interest.” He noted that sometimes, a dictionary definition doesn’t capture the true meaning of a term when it appears in a specific context.

He continued, explaining that a Conflict of Interest exists if representing one client would be directly adverse to another client’s interest or if the representation of one client would be limited by the lawyer’s responsibilities to another past or present client. “You see, a lawyer must be able to devote 100% of his attention to every file, and every single client that he has. ANYTHING that interferes with that, whether it is money information, means the lawyer has a conflict of interest and must let the file go or get in trouble with the bar association.”

One of the boys asked, “How can money get in the way? I mean, doesn’t a lawyer make money on every file? The fee?”

“Ok When a lawyer charges by the hour for his services or if he or she charges a percentage of the recovery, say in a persona injury case or an automobile accident, things like that, his interest aligns with the client’s. In the case of charging by the hour, the attorney simply gets compensated for his time on the file. In the personal injury case, the more money the lawyer gets the client for their injuries, the more money he makes. See? Their interests are the same. A client wants a lawyer to work on his or her case, so they pay the hourly bill. In the injury case, they want as much money as possible, or they don’t mind paying the agreed percentage. The more the merrier!”

“So how can money be a conflict?”

“Let’s pretend that you want your lawyer to write your Will, the piece of paper that tells the world how you want your money and possessions to be distributed after you die. There are times where the lawyer and the client are friends, such good friends that the client wants to leave money to the lawyer after the client dies. The lawyer could easily write the will, but do you see how that might look funny to the rest of the world?”

“Ya, if the lawyer writes the Will, it might be fishy if he’s also getting money from the will – maybe he tricked his friend, maybe not.”

“You are a smart kid. That is exactly right. It smells rotten. So, the best way to get around that smell?”

“I know,” the other boy said, “Let someone else write thee will!”

“Exactly,” the old lawyer smiled.

Are there other examples of Conflicts of Interest?”

“Oh,” said the lawyer, “there are many.”

“Tell us some.”

1. Representing Opposing Parties in the Same Matter

• A lawyer cannot represent two clients whose interests are directly adverse in the same legal matter. For example, an attorney cannot represent the plaintiff and the defendant in the same lawsuit.

2. Concurrent Representation of Clients with Conflicting Interests

• An attorney representing one client might have a conflict if they also represent another client in a separate but related case where their interests could conflict. For instance, an attorney might represent a corporation in a business dispute while simultaneously representing a shareholder suing that same corporation.

3. Former Client Conflicts

• Lawyers must avoid representing a new client in a matter substantially related to work they performed for a former client, especially if the former client’s confidential information could be used to the new client’s advantage.
• Example: A lawyer previously represented a client in a real estate transaction, and now, years later, they are asked to represent another client in a lawsuit against the former client involving the same property.

4. Personal Interests

• A lawyer may have a conflict if their personal interests (financial, family, or otherwise) could affect their ability to provide objective representation. For instance, an attorney cannot represent a party in a lawsuit where the opposing party is a close family member or business partner.

5. Business Transactions with Clients

• Lawyers must only enter business deals with clients if the terms are fair and fully disclosed, and the client is advised to seek independent legal counsel. This type of conflict might arise if a lawyer tries to sell property to a client or enters into a joint business venture.

6. Third-Party Influence

• A conflict may arise if a third party is paying for the lawyer’s services, such as an insurance company covering the legal fees for a policyholder. In this case, the lawyer must prioritize the client’s interests over the payer’s.

7. Multiple Clients in the Same Transaction

• In non-litigation matters, such as drafting a will or structuring a business deal, conflicts arise when a lawyer represents multiple clients whose interests might diverge. For example, representing both sides in a business transaction or advising all heirs on how to divide an estate.
• These are from State v. Latigue (1972) Arizona Supreme Court Decisions: Arizona Case Law: Arizona Law: US Law: Justia. https://law.justia.com/cases/arizona/supreme-court/1972/2485-0.html, Or, Ethics for Government Lawyers |Texas EthicsExchange | Texas Center for Legal Ethics. https://www.legalethicstexas.com/resources/texas-ethicsexchange/ethics-for-government-lawyers/

The lawyer looked at the kids and said that he knew this explanation was complicated and somewhat hard to understand. Still, it would help to consider what is fair to each interested party. They must be confident that their lawyer is treating them fairly and that their lawyer is not affected by his or her responsibility to another client or a former client or by the lawyer’s personal interest, past or present.

This explanation might be a bit confusing but what we have to understand is that what is the most important is that each person must be treated fairly.

ARIZONA Ethical Rile 1.7
Conflict of Interest: Current Clients

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:

(1) the representation of one client will be directly adverse to another client; or

(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if each affected client gives informed consent, confirmed in writing, and:(

1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;

(2) the representation is not prohibited by law; and

(3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal.

(c) A lawyer may not represent a party in asserting a claim against another party represented by a firm if the same person or entity holds an ownership interest, directly or indirectly, of 10 percent or more, or has managerial authority comparable to that of a partner, in the lawyer’s firm and the other firm.

Ariz. R. Sup. Ct. ER 1.7

Amended June 9, 2003, effective 12/1/2003; amended Aug. 27, 2020, effective 1/1/2021.