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CONFLICTS OF INTEREST Barry M. Klayman (TBA) & Eric A. Tilles Arkema Inc.

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Presentation on theme: "CONFLICTS OF INTEREST Barry M. Klayman (TBA) & Eric A. Tilles Arkema Inc."— Presentation transcript:

1 CONFLICTS OF INTEREST Barry M. Klayman (TBA) & Eric A. Tilles Arkema Inc.

2 Conflict of Interest: Current Clients A lawyer shall not represent a client if the representation involves a concurrent conflict of interest.

3 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.

4 Notwithstanding the existence of a concurrent conflict of interest, a lawyer may represent a client if: (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;

5 (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; and (4) each affected client gives informed consent.

6 Consentable v. Non-Consentable Conflicts Non-Consentable Conflicts If the lawyer cannot reasonably conclude that the lawyer is able to provide competent and diligent representation to each affected client. Representation is prohibited by applicable law. (For example, substantive law may prohibit a governmental client from consenting to a conflict of interest.) Representation involves assertion of a claim by one client against another client in the same litigation or other proceeding.

7 Informed Consent Each affected client must be aware of the relevant circumstances and the material and reasonably foreseeable ways that the conflict could have adverse effects on the interests of that client. Under some circumstances, it may be impossible to make the disclosure necessary to obtain consent. Does informed consent require advice of separate counsel?

8 Consent to Future Conflicts The effectiveness of such waivers may depend on the extent to which the client reasonably understands the material risks that the waiver entails. The more comprehensive the explanation of the types of foreseeable adverse consequences of those representations, the greater the likelihood the client will have the requisite understanding.

9 If the consent is general and open-ended, then the consent will more likely be ineffective. If the client is an experienced user of legal services and is reasonably informed regarding the risk that a conflict may arise, its consent it more likely to be effective.

10 Sample Engagement Letter “As we have discussed, you are aware that the firm represents many other companies and individuals. It is possible that, during the time that we are representing you, some of our present or future clients will have [disputes or transactions] with you. You agree that we may continue to represent or may undertake in the future to represent existing or new clients in any matter that is not substantially related to our work for you even if the interests of such clients in those other matters are directly adverse to you.”

11 “We agree, however, that your prospective consent to conflicting representation contained in the preceding sentence shall not apply in any instance where, as a result of our representation of you, we have obtained proprietary or other confidential information of a nonpublic nature, that, if known to such other client, could be used in any such other matter by such client to your material disadvantage.”

12 Conflict of Interest: Former Client

13 Organizational Clients “[The Company [is a subsidiary of the [Name of Parent Company] and] has [numerous affiliates] [the following affiliates: [list affiliates by name]]. You have agreed that our representation of the Company in the matter described in paragraph 1 above does not give rise to an attorney-client relationship between our firm and [the [Name of Parent Corporation] or] any of the Company's affiliates. You also have agreed that our firm, during the course of its representation of the Company, will not be given any confidential information regarding [the parent corporation or] any of the Company's affiliates. Accordingly, you agree that representation of the Company in this matter will not give rise to any conflict of interest in the event other clients of our firm are adverse to [the [Name of Parent Corporation] or] any of the Company's [other] affiliates.]”

14 “It is understood that our client for purposes of this representation is [name of trade association or other group-type client], and not any of its individual members or any other entities whose interests in this matter are being represented by those individual members.”

15 Confirming Consent Written confirmation is not required but is best practice.

16 Revoking Consent A client who has given consent to a conflict may revoke the consent and terminate the lawyer’s representation at any time. Whether revoking consent to the client’s own representation precludes the lawyer from continuing to represent the other clients depends on the circumstances.

17 Loyalty & Confidentiality

18 Types of Conflicts

19 Personal Interest Conflicts

20 Personal, Financial or Business Interests

21 Sexual “Interests” A lawyer shall not have sexual relations with a client unless a consensual relationship existed between them when the client-lawyer relationship commenced. RPC 1.8(j).

22 Business Transactions with Clients A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless: (1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;

23 (2) the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and (3) the client gives informed consent in a writing signed by the client, to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.

24 Gifts A lawyer shall not solicit any substantial gift from a client, including a testamentary gift, or prepare on behalf of a client an instrument giving the lawyer or a person related to the lawyer any substantial gift unless the lawyer or other recipient of the gift is related to the client. For purposes of this paragraph, related persons include a spouse, child, grandchild, parent, grandparent or other relative or individual with whom the lawyer or the client maintains a close familial relationship.

25 Positional Conflicts

26 Organizations as Client

27 Third Party Conflicts

28 Corporate Family Issues

29 Presumption of Shared Confidences

30 “Appearance of Impropriety” Standard

31 A/C PRIVILEGE: Corporations/Associations Control Group Test: City of Philadelphia v. Westinghouse Elect. Corp., 210 F. Supp. 483 (E.D. Pa. 1962). Subject Matter Test: Upjohn Co. v. U.S., 449 U.S. 383 (1981).

32 A/C PRIVILEGE: Corporations/Associations Subject Matter Test: Employee made the communications to secure legal advice; The employee made the communications at the direction of his corporate superiors; The communications concerned matters within the scope of the employee's employment; and The employee was made aware that he was being questioned so that the corporation could secure legal advice. Upjohn Co. v. U.S., 449 U.S. 383 (1981).

33 A/C PRIVILEGE: Corporations/Associations A document need not be authored or addressed to an attorney in order to be privileged. Privileged communications may be shared by non- attorney employees in order to relay information requested by attorneys. Privileged communications may be transmitted between non-attorneys so that the corporation may be properly informed of legal advice and act appropriately. SEPTA v. Caremarkpcs Health, LP, 2008 WL (E.D. Pa. Dec. 9, 2008) (Restrepo, Mag. J.) (applying PA law) (citations omitted).

34 A/C PRIVILEGE In re Teleglobe Communications Corp., 493 F.3d 345 (3d Cir. 2007). The Co-client or Joint Client Privilege The Community of Interest or Common Interest Privilege

35 A/C PRIVILEGE – Joint Privilege Co-Client or Joint- Client Privilege When two or more people consult a single attorney. All clients consent. No substantial risk of lawyer being unable to fulfill duties to all clients.

36 A/C PRIVILEGE- Joint Privilege When co-clients and their common attorneys communicate with one another, those communications are “in confidence” for privilege purposes. Waiver of the joint-client privilege requires the consent of all joint clients. One client cannot unilaterally waive the privilege as to the other joint clients’ communications or as to any communications that relate to other joint clients.

37 A/C PRIVILEGE – Joint Privilege Co-client representation continues until: A client discharges the lawyer or the lawyer withdraws. By implication: when it becomes clear to all parties that the clients’ legal interests have diverged too much to justify using common attorneys.

38 A/C PRIVILEGE – Joint Privilege When former co-clients sue one another, the default rule is that all communications made in the course of the joint representation are discoverable. The Restatement (Third) of the Law Governing Lawyers says it is permissible for co-clients to agree in advance to shield information from one another in subsequent adverse litigation (although there is no direct authority for this proposition).

39 A/C PRIVILEGE- Common Interest Privilege Community-of-Interest or Common-Interest Privilege. The community-of-interest privilege allows attorneys representing different clients with similar legal interests to share information without having to disclose it to others. A/k/a Joint-Defense Privilege.

40 A/C PRIVILEGE- Common Interest Privilege The members of the community of interest must be represented by separate counsel. The members of the community of interest must share a “substantially similar legal interest” (although the legal interest need not be identical). The communication must be in furtherance of the shared legal interest. The communication must be conveyed to the lawyer of the member of the community of interest -- Sharing the communication with a member of the community may destroy the privilege.

41 A/C PRIVILEGE What about sharing of information among corporate affiliates through in-house legal counsel? Possible outcomes: 1. The members of the corporate family comprise one client. 2. The members of the corporate family are joint clients. 3. The members of the corporate family are in a community of interest with one another.

42 A/C PRIVILEGE Teleglobe concludes that the joint client rationale is the most satisfactory explanation and should be applied in analyzing the operation of the attorney- client privilege.

43 Draft Documents/Contracts Drafts of documents prepared by counsel or circulated to counsel for comments on legal issues are privileged if they were prepared for the purpose of giving or obtaining legal advice and contain information or comments not included in the final version. There is no privilege for communications seeking business advice, not legal advice. SEPTA v. Caremarkpcs Health, LP, 2008 WL (E.D. Pa. Dec. 9, 2008) (Restrepo, Mag. J.) (applying PA law).


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