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When the Past and Present Diverge: A Brief Discussion of Former Client Conflicts of Interest Under Rule 1.9(a)

6/24/2019

June 24, 2019

Under Illinois Rule of Professional Conduct 1.9(a), an attorney is prohibited from representing a party whose interests are materially adverse to the interests of a former client if the matters involved in both representations are the same or substantially related, unless the former client gives informed consent. 

“At the core of Rule 1.9 is the lawyer’s continuing duty of loyalty to former clients.” Center for Professional Responsibility, American Bar Association, Annotated Model Rules of Professional Conduct 171 (5th ed. ABA 2003). A concern underlying the rule is the possibility of the lawyer revealing or misusing confidential information learned in the prior relationship. Accordingly, the rule recognizes that representing a client against a former client can result in a threat 1) to either client’s confidential information; 2) to the interests of the present client because of the lawyer’s continuing duties to the former client; or 3) to the interests of both clients because of confusion of the lawyer’s role. Restatement (Third) Law Governing Lawyers §132 cmt. a (2001).

The Illinois Supreme Court has explained that conflicts of interest are broadly construed:

A conflict of interest arises whenever an attorney’s independent judgment on behalf of a client may be affected by a loyalty to another party.  “(The rule against representing conflicting interests) is a rigid one, designed not alone to prevent the dishonest practitioner from fraudulent conduct, but as well to preclude the honest practitioner from putting himself in a position where he may be required to choose between conflicting duties. He should undertake no adverse employment, no matter how honest may be his motives and intentions.” 

In re LaPinska, 72 Ill. 2d 461, 469 (1978), quoting People v. Gerold, 265 Ill. 448, 477 (1914). In considering whether a conflict of interest exists, LaPinska instructed that “we look not toward the congruence of interests, but toward the potential for diverging interests.” Id., at 470. Thus, a key consideration to determine whether an attorney’s professional judgment may be affected by loyalty to another is whether there is a potential for diverging interests. 

Accordingly, when an attorney places him or herself in a position where he or she may have to choose between two conflicting interests, the attorney has engaged in a conflict of interest. Violations of Rule 1.9 have routinely been found when the interests of a lawyer’s present client are adverse to the interests of a former client, such as in real estate transactions, divorce proceedings, and lawsuits involving corporations.

This article will briefly touch on two major aspects of Rule 1.9(a): determining whether a client is a former client, and determining whether the matters are substantially related.

The language of Rule 1.9(a) only deals with situations involving a former client—one whom the attorney is no longer representing. Generally speaking, an attorney-client relationship ceases upon the rendition and satisfaction of the matter the attorney was employed to conduct. One way to determine if the relationship is ongoing is to determine if something inconsistent with the continuation of the relationship has transpired to end that relationship. However, years of mere silence and no contact between an attorney and the client, without more, most likely does not constitute such an event. In re Jones v. Rabanco, Ltd., No. C03-3195P, 2006 U.S. DIst. LEXIS 53766 (W.D. Wash. Aug. 3, 2006).

In Illinois, an attorney-client relationship may be fluid and long-running. That is, in part, because the existence of an attorney-client relationship depends largely upon whether a client could reasonably believe such a relationship exists. For instance, in one case, an attorney-client relationship was found where the client had a longtime relationship with the attorney: there was extensive and frequent contact between them during that time, the client often sought advice from attorney, and the client imposed significant trust in attorney and his professional opinion.  In re Childs, 07 CH 95, No. M.R. 24094 (Nov. 12, 2010).

The Illinois Supreme Court has established that special circumstances or arrangements may show a continuation of the attorney-client relationship after the completion and satisfaction of a matter in which the attorney represented the client. In In re Imming, 131 Ill. 2d 239 (1989), the respondent was charged with entering into improper business transactions with clients by soliciting loans from persons out of settlements he had procured for them in legal matters. The respondent claimed that there was no misconduct because the lenders were not his clients, as his representation of them had ceased before he solicited the loans. The Court agreed that, with regard to some of the lenders, the legal matters had ended prior to the time he solicited loans.  However, the Court stated:
 
All of the loans in these five situations, therefore, occurred so close in time to the respondent’s legal services to each client as to cause the client to believe that the respondent’s business relations were a continuation of the attorney-client relationship. This is certainly reflected in the testimony of many of the client/creditors, who believed the respondent was acting as their attorney at the time the loans were made. 

Imming, 131 Ill. 2d 252-54. The Court declined to disturb the Hearing Board’s findings that attorney-client relationships existed between the respondent and all his lenders. Id., at 254. The Court thus looked to the clients’ reasonable belief when construing the parameters of the attorney-client relationship.
 
In short, if the attorney-client relationship is still on-going, then Rule 1.9 does not apply; instead, Rule 1.7, which deals with concurrent conflicts of interest, most likely applies. 

With regard to whether a prior matter and a subsequent matter are substantially related, matters are often substantially related when they involve the same transaction or legal dispute, or when the lawyer could have obtained confidential information in the first representation that would materially advance the client’s position in the second matter. Rule 1.9 does not require proof that confidential information was actually received, but merely that is it is reasonable under the circumstances to conclude that it could have been. Illinois courts and disciplinary panels look to a three-part test to determine whether there is a substantial relationship: 1) determining the scope of prior representation; 2) determining whether it is reasonable to infer that confidential information would have been given to a lawyer; and 3) determining whether such confidential information is relevant to the issues in the subsequent representation.
 
More specifically, a substantial relationship can be found when the prior representation involved the same parties and the same issues as the subsequent representation, or where the attorney (in the prior representation) was intimately involved in matters that were the subject of the subsequent representation. Furthermore, a Rule 1.9(a) violation may be found in a situation in which an attorney represents a person in preparing documents and later represents another party in litigation in which the validity of those documents is at issue.

For instance, in In re Kearns, 04 CH 80, No. M.R. 22495 (Sept. 17, 2008), an attorney was sanctioned, in part, for violating Rule 1.9(a) by representing the husband of his former client against her in their divorce. The attorney agreed to represent Riana Rai in obtaining an extension of her visa. To respond to the application questions, the attorney had to obtain and did obtain personal information from Ms. Rai, including information regarding her financial situation and employment. One particular question focused on the source, amount, and basis for any income. Subsequently, when the attorney undertook representation of Ivan Atanassov in divorce proceedings against Ms. Rai, her financial status and income was likely to be relevant, and was in fact relevant. Accordingly, the attorney violated Rule 1.9(a) by representing Mr. Atanassov in a substantially similar mater in which his interests where materially adverse to the interests of the attorney’s former client, Ms. Rai.

Rule 1.9 protects the interests of former clients. As such, that rule may also apply to protecting the interests of deceased former clients. For instance, in the Oregon disciplinary case of In re Conduct of Hostetter, 238 P.3d 13 (Ore. 2010), the respondent was suspended for 150 days for, in part, drafting several promissory notes and mortgages on behalf of a client to obtain loans from an individual-lender, and then after the first client passed away, representing that lender in a debt collection action against the first client’s estate to enforce the lender’s rights arising out of the same documents. In concluding that the respondent had violated Rule 1.9, the Oregon Supreme Court determined that the former client’s interests that pertained to the matter in which the attorney had previously represented the client survived her death. Hostetter, 238 P.3d at 26. 

The Court in Hostetter noted that for the attorney’s conduct to constitute a Rule 1.9(a) violation, “the proper analysis is not whether the interests of the former client and current client were adverse during the former client’s lifetime, but whether the surviving interests of the former client are adverse to the current client during the subsequent representation.” Id., at 17. Thus, the former client’s surviving interests and the new client’s interests were materially adverse due to their former relationship as debtor and creditor. As a debtor, the former client would seek to minimize her legal debt as much as reasonably possible (and those interests survived her death and were represented by her personal representative). And, as creditor, the new client would seek to maximize the amount that the former client owed under the loans as much as reasonably and would seek to collect as much of that amount as possible. Id., at 34-35.

In sum, this article does not provide a detailed analysis of all the issues involved with former clients and Rule 1.9. However, given the generally consistent high numbers of ethics inquiries related to former client conflicts of interest, this article seeks to provide certain general information on what it means to be a former client and what it means to have substantially related matters. It also provides a brief discussion on an area within the topic of former client conflicts of interest that may pertinent or thought-provoking to some.