What on Earth's a Positional Conflict, and What'll They Think of Next?
by R. Gerald Markle
(County Bar Update, April 2004, Vol. 24, No. 4)

What on Earth's a Positional Conflict, and What'll They Think of Next?

By R. Gerald Markle, member, LACBA Professional Responsibility and Ethics Committee. Markle, of the law firm of Pansky & Markle, has devoted his practice to legal ethics and professional liability for two decades. The opinions expressed are his own.

Legal ethicists -- "legal ethicist" being a self-styled, somewhat presumptuous term referring to attorneys like myself who claim to know a little something extra about legal ethics -- enjoy being called upon to give advice to other lawyers on the subtleties of professional responsibility, compliance with those pesky Rules of Professional Conduct, and the general risks/rewards of ethical conduct. While legal ethicists could not reasonably dispute the often-heard observation that solutions to many ethical questions are self-evident and merely require applying notions of common sense and basic honesty, they would state that the field of ethics is becoming more complex. They would say this is especially true for conflicts of interest.

As a young lawyer many, many years ago, I was assigned the task of researching a conflict of interest disqualification motion.  At the time, I could count the cases that were annotated to the conflicts rule (then, Rule 5-101; currently, Rule 3-310) on one or two hands. Now the annotated cases number well into the hundreds, each one purporting to refine the law a little bit further. Has the law relating to conflicts really become so complicated?

The answer is both "Yes" and "No." On one hand, the still-burgeoning case law attests to the adage, "The devil's in the details," not to an over-complication of the law. While the factual variations are innumerable, almost all of the reported cases turn on the violation (or not) of one of two fundamental lawyer duties: undivided loyalty (absolute, complete fidelity by lawyer to client) and confidentiality (inviolate maintenance by lawyer of a client's confidences and secrets).  At the risk of oversimplifying, the former duty prevents us from suing or otherwise representing an interest adverse to an existing client, while the latter duty prevents us from suing or representing an interest adverse to a former client whenever we possess material, substantially related, confidential information obtained as a result of the prior relationship.

Over the last 20 years or so, clients and their lawyers (and their lawyers' lawyers) have litigated the heck out of these conflicting duty issues -- in disqualification cases, disciplinary proceedings, fee disputes, and in other contexts -- almost always with one or both of these duties being at the core of resolution. Looking backward, the basic question tends to be the same: Has the duty of loyalty or the duty of confidentiality been breached? If so, then disqualification or discipline or fee disgorgement (or some other bad result for the lawyer) is in order.

In early 2004, though, a New York trial court seems to have expanded the rules. In that case (according to an article appearing in the January 24, 2004 edition of the New York Law Journal), a law firm represented a drug manufacturer and at the same time an academic institution on similar but legally unrelated intellectual property matters. In its subsequent legal malpractice/breach of fiduciary claim against the law firm, the drug manufacturer client asserted that the law firm improperly engaged in the representation of conflicting interests because it knew or should have known that down the road the academic institution client intended to compete with and perhaps sue the drug manufacturer client over drug manufacturing technology.

While its ruling was not dispositive of the entire case, the New York trial court held that the law firm was guilty of a violation of New York's conflict of interest rule. How the New York case ultimately will turn out is unknown, of course -- The trial court might be reversed or the "conflict" might be evaluated on a more traditional basis. But at present the case stands for the proposition that it's a disqualifying conflict for an attorney to represent more than one client if the clients are competitors in the same industry and legal disputes between them can be foreseen. This conclusion, which is sometimes known as positional conflict analysis, has not heretofore been the predicate for a conflict of interest finding in California.

There is no California case law prohibiting an attorney from representing clients with antagonistic legal positions in unrelated matters. But consider this hypothetical: Attorney A is hired by a local businessperson to challenge a municipality's power to regulate parking near the property of the business. The same attorney is then hired by another businessperson to support a similar exercise of municipal authority over parking by a neighboring city. Assume that the facts and legal analyses in both cases are substantially similar. Of course, the outcome of the advocacy is not; Attorney A wins one case and loses the other one.

May the losing client successfully sue Attorney A for a conflict violation? What about fee disgorgement? Would the State Bar's disciplinary authority be interested in taking a look?

Our friend common sense tells us that the answer to each of these questions should be "No." But the New York trial court evidently would disagree, and after reading the first sentence of the official discussion to California's conflicts rule, you might disagree, too:

Rule 3-310 is not intended to prohibit a member from representing parties having antagonistic positions on the same legal question that has arisen in different cases, unless representation of either client would be adversely affected. (Emphasis added.)

Now consider this addendum to the hypothetical: As luck would have it, you're sitting in court one morning, number 3 on the calendar, waiting your turn to argue a motion. Items 1 and 2 on the calendar look similar, have to do with the exercise of municipal power, and involve different parties and counsel.  Attorney A proceeds to give two of the most persuasive oral arguments you've ever heard.  After convincing you of the correctness of the client's position in case 1, Attorney A succeeds in convincing you that just the opposite result is correct for case 2. But, you recognize, the law must be consistent.

From the bench the judge confirms your analysis. The judge finds for Attorney A's client in case 2 and says that the tentative in favor of A's client in case 1 (which the judge had taken under submission) will now go the other way.  The client in case 1, who is sitting right next to you in the courtroom, is seething. The client observes to you that A's representation of the client in case 2 "adversely affected" the representation of the client in case 1. What do you say in response?

A legal ethicist -- if asked by Attorney A prior to the arguments in cases 1 and 2 -- would likely advise Attorney A to decline to concurrently represent both client 1 and client 2.