Conflict of interest costs law firm $250,000

Last month, the Illinois Appellate Court released an interesting case (from earlier this year) that addresses the consequences of agreeing to represent a client knowing that doing so would constitute a conflict of interest.  As the title of this post suggests, that consequence was that the firm was not allowed to recover a $250,000 fee.  Although there are some inconsistencies within the court’s reasoning, I think it reaches a correct result.  The case is called In re Marriage of Newton and it is available here.

The story behind the case started when a husband consulted a lawyer about hiring the lawyer to represent him in his divorce.  Having decided not to represent the husband, the attorney decided to represent his wife instead, who consulted the lawyer some time later.  After the husband filed a motion to disqualify the wife’s attorney (and his firm), the court held some hearings, the results of which were appealed which led to more hearings and eventually, after about two years of litigation on the question, the lower court not only disqualified the firm but also ordered that it did not have a right to recover any fees.  When the firm protested in court, the judge held the lawyers in contempt.

On appeal from the contempt order, the court believed that to discuss the validity of the contempt order it was also necessary to discuss the validity of the disqualification order and the order barring the recovery of fees.

Before we go any further, it should be noted that the fee issue was based on a specific statute that allows a wife to make her husband pay for her lawyer.  This is an important fact because the firm in question was requesting that the party it supposedly betrayed pay for its fees.  The court did not like that idea.

The court began its analysis by pointing out correctly that, an attorney-client relationship can be created based on the client’s belief that it has been created and does not require a formal handshake, or signing of a contract.  For this reason, given the evidence adopted as true by the lower court, the court concluded that a professional relationship was established with the husband during the initial interview.

This is okay, but it omits the fact that the attorney clearly declined to accept the representation at the end of the interview.  The case is better viewed as an example of the case of a prospective client under Rule 1.18, but since that rule did not exist at the time of the facts of the case, the court analyzes the issue under Rule 1.9 which is about the duty owed to former clients.

If the husband is a former client, then Rule 1.9 prohibits the lawyer (and 1.10 extends that to all other lawyers in his law firm) from taking on the representation of the wife in the divorce.  Knowing this, the firm nevertheless agreed to represent her.  (Note that during the evidentiary hearings the wife testified that the lawyer admitted to her he knew taking her case would create a conflict; but the lawyer denied saying this.  The lawyer also denied having taken any notes during his meeting with the husband, but the husband asserted he did.  The court did not give much credibility to the lawyer.

Thus, assuming as true that the attorney agreed to represent a client with full knowledge that doing so would create a conflict of interest, the court found that the agreement for services was null and void from its inception and thus did not give the lawyers the right to enforce it.  Citing the principle that an attorney may not receive fees from the party he has wronged, the court held the lawyers were not entitled to the fees they claimed to have earned during the two years they represented the wife.

The firm argued that it should have been compensated for the work done for the client up to the time it was disqualified.  The court disagreed, however, finding that the firm had not been litigating in good faith whether its representation of the wife constituted a conflict, because it had already admitted to her that it was.  One thing is to say that the firm did not think there was a conflict and was willing to fight for two years to argue the point, and quite another to say that the firm knew there was a conflict but wanted to fight for two years to be allowed to keep the case anyway.  The court saw the case more like the latter than the former.

For me the key to this case, which the court does not emphasize enough, is the fact that the lawyer/firm actually knew going in he/it was engaging in a conflict of interest.  I have no problem finding that under those circumstances the firm should pay the price.

I do worry, however, that read more generally, the case can penalize a firm that is caught in conflict (not of its own fault).  Take a case where two firms merge in the middle of the litigation creating a conflict in a case, or a case, like the famous Cunningham case used in many casebooks, where an offer to settle the case creates a conflict for the opposing firm.  In such a case, I think it would be fair to allow the conflicted firm to withdraw and allow it to recover fees for the work already performed for the client before it realized it had a conflict including for the period of time during which the firm acted with a conflict but had not realized it yet.

In the end these two possible approaches open the question whether the notion of conflicts of interest should be seen as a sort of “strict liability” case where the fault of the firm does not matter.  According to this approach, if there the firm acted with a conflict, the firm acted wrongly and should not recover its fees. According to the other view, if the firm acted with a conflict, it should be allowed to recover the fees for the services rendered until it is officially disqualified as long as the firm acted without knowledge or fault.

Of course, the question gets more complicated if it can be argued that the firm acted with the conflict because of its own negligence.  I would say that such a case should be resolved just as if the firm acted intentionally (as in the case I am discussing here), because firms have a duty to use reasonable care to avoid conflicts.

One last point: I mentioned at the top that there are some inconsistencies in the analysis of the court and here it is.  Having decided that the attorney created a professional relationship with the husband during an initial interview - even though the interview resulted in the lawyer rejecting the case - the court goes on to cite some older cases that hold that for there to be an attorney-client relationship there has to be a contract and a clear meeting of the minds.  The expressions cited from these cases, clearly contradict the principle upon which the court based its decision.

The result of the case, however, it correct, it seems to me because the key is not whether a relationship was formed during that interview, but the fact that the attorney stated he knew taking on the new case would be a conflict and acted in a way that showed he did not care.

Fortunately, looking forward any future cases with similar facts would be decided using the new rule on prospective clients (Rule 1.18) which should make the analysis a bit more straightforward.

Illinois Appellate Court reverses conviction because of ineffective assistance of counsel based on conflict of interest

Last September, in a short, but well written opinion, the Illinois Appellate Court addressed the issue of whether a conviction should be reversed due to a conflict of interest.  This was the second case in which the court reversed a conviction for ineffective assistance of counsel that month.  The case is called Illinois v Dopson  and it is available here.  My comment on the other case decided that month is here.

In Illinois v Dopson, the attorney for the accused was representing two criminal defendants concurrently in separate cases.  The attorney did not know that one of these defendants was a confidential informant who provided all the information used to arrest the other client.  When the state disclosed to the attorney that one of his clients would be used as a witness against the other client, the attorney ceased to represent the client who was going to be a witness for the state.  He continued to represent the other client, though, and that client was convicted.

On appeal, the client claimed his attorney has provided ineffective assistance of counsel because he continued to represent him while he had a "per se" conflict of interest.  The court agreed.

The court started by pointing out that even though Strickland v Washington usually requires the defendant to show serious attorney error and prejudice, a showing of a per se conflict, by definition, satisfies both prongs of the test.  Operating under a per se conflict is such a serious error there is no need to show prejudice.  Reversal is automatic.

Since Illinois has decided already that prior or contemporary representation of a State's witness constitutes a per se conflict, the Court had no problem finding the case required reversal.

The State claimed there was no conflict of interest because the attorney was not contemporaneously representing the two clients at the time of the defendant’s trial. However, all that means is that the conflict went from being a concurrent conflict to a successive one. Either way, as the court correctly states, “the State’s attempt to narrow the scope of the per se conflict-of-interest rule belies its underlying purpose” which is to make sure an attorney does not find himself in a position where the attorney can’t represent the interests of one client because of his duties to another. As the court states, this “presupposes that defense counsel’s vigorous cross-examination of the State’s witness should be unhindered” by the need to protect a former client’s confidences. At the time of the trial, the attorney was prevented from attempting to elicit information obtained during that prior representation. Whether such information existed, or would have been useful to the defense, is irrelevant.

Finally, although it had stated it was not necessary to establish prejudice, the court points out that the attorney’s cross examination of his former client “was mild, at best.” The attorney did not attack her credibility or point out her possible bias.

Thus, any way you look at it, the court found the circumstances showed a clear conflict of interest which required reversal of the conviction.

Illinois Appellate Court reverses conviction (based on a negotiated plea) because of ineffective assistance of counsel

Convicted defendants often argue ineffective assistance of counsel on appeal, but the argument is not successful most of the time.  Last September, however, the Illinois Appellate Court decide two cases in favor of defendants claiming ineffective assistance of counsel.  I will comment briefly on both of them in separate posts.  Here is the first one.

In this first case, the court set aside a negotiated plea, after finding that the defendant's attorney had rendered ineffective assistance.  In that case, the defendant argued he had agreed to the plea offer based on trial counsel's representation that there were no witnesses available to testify on defendant's behalf, when, in fact, there was one such witness.

The court explains that although to present a witness in a case is a discretionary decision for which usually does not support a claim of ineffective assistance of counsel, in this case the attorney's conduct was not deciding not to use a witness but failing to investigate if there were any witnesses.  The court added that whether defense counsel was ineffective for failure to investigate is generally determined by the value of the evidence that had been available but the attorney failed to find.

Using that standard, the court found that the defendant was able to make a case of ineffective assistance of counsel under the Strickland v. Washington standard (attorney error and prejudice).

The case is called People v Clark and it is available here.

Greetings from Switzerland

I am coming to you "live" today from Lucerne, Switzerland!  I came here to teach a class on International Torts at the University of Lucerne's Law School, with which my law school has an exchange program.  If you are interested in what I will be covering in that course, go here.  The book I put together for the course is about 150 pages long right now, but it will be shorter next summer when the Supreme Court decides some of the cases I have in the book.  For more about that go here, here and here.

Oral argument audio in Smith v Cain is now available

The oral argument in Smith v Cain is available here.

Happy Birthday to the Blog!

Today is this blog's third anniversary!  I started it on November 11, 2008, just a few days after I had started my Torts blog.  Since then I have posted more than 800 posts!  I thank you for your support and hope you will continue to follow the blog in the years to come.

Oral argument recap in Smith v. Cain: it did not go well for the prosecution!

A few days ago I posted a note about a new case before the Supreme Court on prosecutorial misconduct in New Orleans called Smith v. Cain. The oral argument before the Supreme Court was today and apparently it did not go well for the office of the prosecutor.  As reported by Lyle Denniston of the SCOTUS blog, the justices pretty much actually suggested to the attorney representing the DA's office that she should just give up.  Here is an excerpt of Denniston's argument recap:

There may be many ways for a lawyer to realize that an argument before the Supreme Court is falling flat, but none can top this: a Justice asking if the counsel had ever considered simply forfeiting the case. That is what happened on Tuesday to Donna R. Andrieu, an assistant district attorney in New Orleans, as her argument lay all about her, in shambles. It is a heavy burden for a lawyer from that oft-criticized office to mount any defense of its prosecutions, but Andrieu repeatedly found ways to botch virtually every point as she argued Smith v. Cain . . .

. . . .   The aggressive exchanges [between her and the justices] were getting to Andrieu, and the phrase “I’m sorry” began appearing regularly in her answers, as she suggested, now and then, that she had misunderstood the questions. As her argument was winding down, Justice Elena Kagan leaned forward and asked: “Ms. Andrieu, did your office ever consider just confessing error in this case?” Stunned, the prosecutor said: “I’m sorry?” Kagan repeated: “Did your office ever consider just confessing error in this case? You’ve had a bunch of time to think about it. Do you know? We took cert a while ago. I’m just wondering whether you’ve ever considered confessing error.” The prosecutor answered: “Your Honor, we believe that we have an argument . . . 

It only got worse for Andrieu. Justice Antonin Scalia suggested that the prosecutor “stop fighting as to whether it should be turned over. Of course it should have been turned over…Why don’t you give that up?”   . . .

At that point, it seemed that nothing more could embarrass the New Orleans prosecutor. But Justice Sotomayor then brought up the “serious accusations against the practices of your office, not yours in particular but prior ones. It is disconcerting to me that when I asked you the question directly should this material have been turned over, you gave an absolute no.” Andrieu weakly suggested that she had misunderstood the question.

But Sotomayor pressed on: “It is somewhat disconcerting that your office is still answering equivocally on a basic obligation as one that requires you to have turned these materials over, whether it caused harm or not.” Andrieu still did not seem to understand.  . . .

I guess this should not be surprising, given the nature of the allegations and the arguments involved, but it is upsetting that it comes a year too late for John Thompson, who spent years in prison because of prosecutorial misconduct in the same office.  The Supreme Court reversed a verdict in his favor last year.  (Go here and scroll down for a lot of information on that case.)

You can read the full article on the oral argument here.

You can read the transcript of the oral argument here.

UPDATE 11/12/11: The audio of the oral argument in Smith v Cain is now available.  To listen to is now click here here.

UPDATE 1/12/12:  The Supreme Court announced the decision in Smith v Cain today.  Go here for more information.

Supreme Court to hear another case on prosecutorial misconduct from New Orleans

As you probably remember, last year the Supreme Court decided Connick v. Thompson, which has been described as "one of the most bitterly divided opinions of the Court in a criminal case in recent years," absolving the New Orleans office under DA Harry Connick, Sr. of complaints that it had failed to train prosecutors about their duty to disclose exculpatory evidence.  (If you type "Thompson" or "Connick" on the "search this blog box" on the right side panel (under my name), you will find a number of entries with a lot of information about that case.)

At 11 a.m. this coming Tuesday, the Supreme Court will consider new claims of misconduct by prosecutors in the New Orleans district attorney’s office when it hears oral arguments in a case called Smith v. Cain.

The case involves the same complaint:  that the prosecution team for Orleans Parish follows a continuing policy of refusing to hand over exculpatory evidence to defense lawyers.

Go here for more on the background of the case.

Go here for access to all the relevant documents about the case, including the lower court opinion and the briefs of the parties.

Audio of Supreme Court oral arguments is now available

A few days ago, I wrote about two cases before the Supreme Court on ineffective assistance of counsel.  See here.   Both cases ask the Court to decide whether a conviction should be reversed due to an attorney's mistaken/incompetent advice during plea negotiations. The attorney's conduct in Frye was also a violation of the attorney's duty under rules of professional conduct.  You can now listen to the oral arguments here and here.

Article on ethical issues related to the representation of older clients and clients with diminished capacity

The most recent issue of the Illinois Bar Journal has an article on the ethical issues related to the representation of older clients and clients with diminished capacity.  You can read the full article here.