Monday, July 16, 2012

Choice of Laws and Concurrent Conflicts

Assume a firm is asked to represent a client in a jurisdiction against another current client of the firm.  Then assume that this would be allowed under the rules of that jurisdiction but not under the rules of the jurisdiction where the other current client is represented.  Which rules govern?  Should the rules allow a firm to represent an interest adverse to a current client in a different jurisdiction absent client consent?

Here is a comment posted in the Legal Ethics Forum on this question:

The New York office of Law Firm represents Company A on a transactional matter involving parties and commitments in New York and London.  While that matter is pending, Company B (in London) wants to retain a lawyer in the London office of Law Firm to handle a London-based arbitration against Company A.  Assume the arbitration is completely unrelated to the work that the New York office of Law Firm is handling for Company A.

Now consider that the ethics rules in England permit law firms to be adverse to existing clients in unrelated matters.  In other words, under the Rules applicable in England, Law Firm would have no conflict of interest if it represents Company B in the arbitration.  In contrast, the Model Rules (and the New York Rules) do not permit lawyers to be adverse to current clients in unrelated matters.  Thus, Law Firm would have a conflict under the New York Rules.  So does Law Firm have a conflict of interest if it represents Company B?

A review of Rule 8.5 (Choice of Law) yields no clear answer.  For matters pending before a tribunal, Rule 8.5 instructs us to apply the rules of the jurisdiction where the tribunal sits (for the arbitration, that would be England).  But on the other hand, Rule 8.5 strongly implies that the New York Rules should govern the Law Firm's representation of Client A in the transational matter.

The ABA Commission on Ethics 20/20 has just circulated a new draft of a possible proposed amendment to Rule 1.7 that would help to address this choice of law problem.  It would allow, subject to several limitations, lawyers and clients to agree that their relationship will be governed by a particular jurisdiction’s rules of professional conduct relating to conflicts of interest.  For example, given that Law Firm's representation of Company A has a nexus to England, Company A and Law Firm could agree at the outset of the engagement that any future conflicts will be resolved under the Rules in England.  This agreement would be a kind of advance waiver similar to what is already permitted under Rule 1.7, Comment [22].  The idea is that such agreements could address the issue more clearly than is possible under Rule 8.5.

The Commission's draft proposal and report on this topic can be found here.  The cover memo is here. Comments should be submitted to by August 15th.  If the Commission decides to pursue this proposal, it would be presented to the ABA House of Delegates in February 2013.

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