Ethics opinion about a business conflict goes wrong.

It is very tempting to stay on the topic of bar examinations today, given recent absurdist developments. Arkansas has declared it simply has to have its in-person bar exam in July 2020 because things are likely to get worse as the year goes on. Oklahoma has attempted to reassure everyone about the safety of their in-person planned exam in a message that simultaneously demands that all test takers self-quarantine for 14 days before the exam. Virginia, trying to take the cake apparently, is insisting on a courtroom attire dress code for their in-person exam but is doing away with having to wear a tie as a concession to COVID-19. It is tempting, but it’s all too frustrating, so…

Instead, let’s go back to some of our roots and discuss a recent ethics opinion. It comes out of Ohio and it addresses a conflict issue, but is noteworthy for at least two reasons: (1) it addresses a conflict of interest issue involving representation of a government entity and (2) it sort of addresses something that is more a business conflict issue rather than a true ethical conflict. If you’d rather just read the opinion, you can access it here.

Ohio Board of Professional Conduct Adv. Op. 2020-04 weighs in on whether a firm has a problem representing a group of landowners who are opposing a zoning variance sought by an agency seeking to establish a shelter for domestic violence victims. The agency is not a client of the firm in other matters, but the firm does represent a community mental health board that contracts with the agency. The firm has a one-year contract to perform legal services on an “as needed” basis to the board but has not been asked to do any work related to the zoning variance matter. The firm does know though that the board supports the agency’s effort to obtain the variance and wants the agency to succeed.

Now, most lawyers would hear that scenario and see a likely “business” conflict but no ethical conflict. By business conflict, I simply mean that the firm might not have wanted to take on the landowners because it might displease the institutional client – which might be a better source of ongoing and continued business to the firm.

The Ohio opinion, however, finds a way to treat the situation as an ethical conflict but, at its heart, it does so only by turning the business conflict into a material limitation conflict using the idea of “personal interest” of the lawyer as something that could be expanded to be the firm’s “personal” financial interests.

I am far from convinced that such an analysis actually works.

The opinion spends only a paragraph explaining something that should be obvious – this is not a representation involving direct adversity between firm clients. After that, the opinion lays out its argument for the existence of a “material limitation” problem for the firm. The opinion begins on the right foot by explaining how there does not appear at first to be any conflict because “the law firm’s provision of legal services to the board and its representation of the landowners are wholly separate and unrelated.” The opinion though pivots to a required “closer examination” leading it to the idea that “it would be reasonable to conclude that the board’s overall interest in supporting the agency’s zoning variance may compromise the firm’s
representation of the landowners opposing the variance.”

Delving into more explanation, the opinion speculates that the firm might be limited in pursuing legal alternatives for the landowners because of the overall interests of the other firm client. All of that is well and good, as it is true that sometimes material limitation conflicts require some digging to understand, but the opinion then moves fully into rhetoric that sounds as an analysis of a business conflict.

Specifically, the opinion points to the firm’s “inherent financial interest in maintaining its standing client-lawyer relationship with the board” as one of the factors leading to a conclusion that there is a material limitation conflict requiring waivers from both the landowners and the board in order for the firm to continue both representations.

The opinion further undercuts any claim to be purely addressing an ethical conflict question by explaining that, if the clients won’t provide consent, then the firm only has to withdraw from one of the two engagements. That remedy is most assuredly the stuff of business conflicts. Traditionally, a firm that needs to extract itself from conflicting representations that run afoul of the ethics rules cannot simply drop one of the two clients like a “hot potato,” but have to withdraw from both client representations. There are exceptions, but none of those exceptions are identified in this opinion.

The opinion also suffers from at least one more flaw. Even under its own premise, it does not follow that both the board and the landowners would need to provide consent. The only representation that the opinion discusses as being potentially harmed by the conflict is the representation of the landowners. Thus, the landowners can be said to be the only clients “affected” by the material limitation conflict. Notably, the opinion never actually quotes the language of the rule it is purporting to apply and never reminds the reader that RPC 1.7(b) only requires informed consent from “each affected client.” Thus, as long as the landowners in the zoning variance proceeding were willing to provide informed consent to the firm’s representation despite the fact that the firm’s relationship with the board could limit available options and approaches, then the rule would still be satisfied.

One thought on “Ethics opinion about a business conflict goes wrong.

  1. Material limitation conflicts seem to be swallowing the Rule here in Wisconsin, too. Not so much in opinions but I’m seeing them creeping into disciplinary cases where they really don’t need to be.

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