Rule 1.06. Conflict of Interest: General Rule

RULE 1.06. Conflict of Interest: General Rule

(a) A lawyer shall not represent opposing parties to the same litigation.

(b) In other situations and except to the extent permitted by paragraph (c), a lawyer shall not

represent a person if the representation of that person:

(1) involves a substantially related matter in which that person’s interests are

materially and directly adverse to the interests of another client of the lawyer or the

lawyers firm; or

(2) reasonably appears to be or become adversely limited by the lawyers or law firm's

responsibilities to another client or to a third person or by the lawyers or law firm’s

own interests.

(c) A lawyer may represent a client in the circumstances described in (b) if:

(1) the lawyer reasonably believes the representation of each client will not be

materially affected; and

(2) each affected or potentially affected client consents to such representation after

full disclosure of the existence, nature, implications, and possible adverse

consequences of the common representation and the advantages involved, if any.

(d) A lawyer who has represented multiple parties in a matter shall not thereafter represent

any of such parties in a dispute among the parties arising out of the matter, unless prior

consent is obtained from all such parties to the dispute.

(e) If a lawyer has accepted representation in violation of this Rule, or if multiple

representation properly accepted becomes improper under this Rule, the lawyer shall

promptly withdraw from one or more representations to the extent necessary for any

remaining representation not to be in violation of these Rules.

ter, unless prior

consent is obtained from all such parties to the dispute.

(e) If a lawyer has accepted representation in violation of this Rule, or if multiple

representation properly accepted becomes improper under this Rule, the lawyer shall

promptly withdraw from one or more representations to the extent necessary for any

remaining representation not to be in violation of these Rules.

(f) If a lawyer would be prohibited by this Rule from engaging in particular conduct, no other

lawyer while a member or associated with that lawyer's firm may engage in that conduct.

Comment:

Loyalty to a Client

1. Loyalty is an essential element in the lawyer’s relationship to a client. An impermissible

conflict of interest may exist before representation is undertaken, in which event the

representation should be declined. If such a conflict arises after representation has been

undertaken, the lawyer must take effective action to eliminate the conflict, including

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withdrawal if necessary to rectify the situation. See also Rule 1.17. When more than one

client is involved and the lawyer withdraws because a conflict arises after representation,

whether the lawyer may continue to represent any of the clients is determined by this Rule

and Rules 1.05 and 1.09. See also Rule 1.07(c). Under this Rule, any conflict that prevents a

particular lawyer from undertaking or continuing a representation of a client also prevents any

other lawyer who is or becomes a member of or an associate with that lawyer’s firm from

doing so. See paragraph (f).

2. A fundamental principle recognized by paragraph (a) is that a lawyer may not represent

opposing parties in litigation. The term opposing parties as used in this Rule contemplates a

situation where a judgment favorable to one of the parties will directly impact unfavorably

upon the other party

or becomes a member of or an associate with that lawyer’s firm from

doing so. See paragraph (f).

2. A fundamental principle recognized by paragraph (a) is that a lawyer may not represent

opposing parties in litigation. The term opposing parties as used in this Rule contemplates a

situation where a judgment favorable to one of the parties will directly impact unfavorably

upon the other party. Moreover, as a general proposition loyalty to a client prohibits

undertaking representation directly adverse to the representation of that client in a

substantially related matter unless that client’s fully informed consent is obtained and unless

the lawyer reasonably believes that the lawyer’s representation will be reasonably protective

of that client’s interests. Paragraphs (b) and (c) express that general concept.

Conflicts in Litigation

3. Paragraph (a) prohibits representation of opposing parties in litigation. Simultaneous

representation of parties whose interests in litigation are not actually directly adverse but

where the potential for conflict exists, such as co-plaintiffs or co-defendants, is governed by

paragraph (b). An impermissible conflict may exist or develop by reason of substantial

discrepancy in the party’s testimony, incompatibility in positions in relation to an opposing

party or the fact that there are substantially different possibilities of settlement of the claims or

liabilities in question. Such conflicts can arise in criminal cases as well as civil. The potential

for conflict of interest in representing multiple defendants in a criminal case is so grave that

ordinarily a lawyer should decline to represent more than one co-defendant. On the other

hand, common representation of persons having similar interests is proper if the risk of

adverse effect is minimal and the requirements of paragraph (b) are met. Compare Rule 1.07

involving intermediation between clients.

Conflict with Lawyers Own Interests

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dants in a criminal case is so grave that

ordinarily a lawyer should decline to represent more than one co-defendant. On the other

hand, common representation of persons having similar interests is proper if the risk of

adverse effect is minimal and the requirements of paragraph (b) are met. Compare Rule 1.07

involving intermediation between clients.

Conflict with Lawyers Own Interests

4. Loyalty to a client is impaired not only by the representation of opposing parties in

situations within paragraphs (a) and (b)(l) but also in any situation when a lawyer may not be

able to consider, recommend or carry out an appropriate course of action for one client

because of the lawyer’s own interests or responsibilities to others. The conflict in effect

forecloses alternatives that would otherwise be available to the client. Paragraph (b)(2)

addresses such situations. A potential possible conflict does not itself necessarily preclude the

representation. The critical questions are the likelihood that a conflict exists or will eventuate

and, if it does, whether it will materially and adversely affect the lawyer’s independent

professional judgment in considering alternatives or foreclose courses of action that

reasonably should be pursued on behalf of the client. It is for the client to decide whether the

client wishes to accommodate the other interest involved. However, the client’s consent to the

representation by the lawyer of another whose interests are directly adverse is insufficient

unless the lawyer also believes that there will be no materially adverse effect upon the

interests of either client. See paragraph (c).

d on behalf of the client. It is for the client to decide whether the

client wishes to accommodate the other interest involved. However, the client’s consent to the

representation by the lawyer of another whose interests are directly adverse is insufficient

unless the lawyer also believes that there will be no materially adverse effect upon the

interests of either client. See paragraph (c).

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5. The lawyer’s own interests should not be permitted to have adverse effect on representation

of a client, even where paragraph (b)(2) is not violated. For example, a lawyer’s need for

income should not lead the lawyer to undertake matters that cannot be handled competently

and at a reasonable fee. See Rules 1.01 and 1.04. If the probity of a lawyer’s own conduct in a

transaction is in question, it may be difficult for the lawyer to give a client detached advice. A

lawyer should not allow related business interests to affect representation, for example, by

referring clients to an enterprise in which the lawyer has an undisclosed interest.

Meaning of Directly Adverse

6. Within the meaning of Rule 1.06(b), the representation of one client is directly adverse to

the representation of another client if the lawyer’s independent judgment on behalf of a client

or the lawyer’s ability or willingness to consider, recommend or carry out a course of action

will be or is reasonably likely to be adversely affected by the lawyer’s representation of, or

responsibilities to, the other client. The dual representation also is directly adverse if the

lawyer reasonably appears to be called upon to espouse adverse positions in the same matter

or a related matter. On the other hand, simultaneous representation in unrelated matters of

clients whose interests are only generally adverse, such as competing economic enterprises,

does not constitute the representation of directly adverse interests

dual representation also is directly adverse if the

lawyer reasonably appears to be called upon to espouse adverse positions in the same matter

or a related matter. On the other hand, simultaneous representation in unrelated matters of

clients whose interests are only generally adverse, such as competing economic enterprises,

does not constitute the representation of directly adverse interests. Even when neither

paragraph (a) nor (b) is applicable, a lawyer should realize that a business rivalry or personal

differences between two clients or potential clients may be so important to one or both that

one or the other would consider it contrary to its interests to have the same lawyer as its rival

even in unrelated matters; and in those situations a wise lawyer would forego the dual

representation.

Full Disclosure and Informed Consent

7. A client under some circumstances may consent to representation notwithstanding a

conflict or potential conflict. However, as indicated in paragraph (c)(l), when a disinterested

lawyer would conclude that the client should not agree to the representation under the

circumstances, the lawyer involved should not ask for such agreement or provide

representation on the basis of the client’s consent. When more than one client is involved, the

question of conflict must be resolved as to each client. Moreover, there may be circumstances

where it is impossible to make the full disclosure necessary to obtain informed consent. For

example, when the lawyer represents different clients in related matters and one of the clients

refuses to consent to the disclosure necessary to permit the other client to make an informed

decision, the lawyer cannot properly ask the latter to consent.

8. Disclosure and consent are not formalities. Disclosure sufficient for sophisticated clients

may not be sufficient to permit less sophisticated clients to provide fully informed consent

lients in related matters and one of the clients

refuses to consent to the disclosure necessary to permit the other client to make an informed

decision, the lawyer cannot properly ask the latter to consent.

8. Disclosure and consent are not formalities. Disclosure sufficient for sophisticated clients

may not be sufficient to permit less sophisticated clients to provide fully informed consent.

While it is not required that the disclosure and consent be in writing, it would be prudent for

the lawyer to provide potential dual clients with at least a written summary of the

considerations disclosed.

9. In certain situations, such as in the preparation of loan papers or the preparation of a

partnership agreement, a lawyer might have properly undertaken multiple representation and

be confronted subsequently by a dispute among those clients in regard to that matter.

Paragraph (d) forbids the representation of any of those parties in regard to that dispute unless

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informed consent is obtained from all of the parties to the dispute who had been represented

by the lawyer in that matter.

10. A lawyer may represent parties having antagonistic positions on a legal question that has

arisen in different cases, unless representation of either client would be adversely affected.

Thus, it is ordinarily not improper to assert such positions in cases pending in different trial

courts, but it may be improper to do so in cases pending at the same time in an appellate court.

11. Ordinarily, it is not advisable for a lawyer to act as advocate against a client the lawyer

represents in some other matter, even if the other matter is wholly unrelated and even if

paragraphs (a), (b) and (d) are not applicable. However, there are circumstances in which a

lawyer may act as advocate against a client, for a lawyer is free to do so unless this Rule or

another rule of the Texas Disciplinary Rules of Professional Conduct would be violated

cate against a client the lawyer

represents in some other matter, even if the other matter is wholly unrelated and even if

paragraphs (a), (b) and (d) are not applicable. However, there are circumstances in which a

lawyer may act as advocate against a client, for a lawyer is free to do so unless this Rule or

another rule of the Texas Disciplinary Rules of Professional Conduct would be violated. For

example, a lawyer representing an enterprise with diverse operations may accept employment

as an advocate against the enterprise in a matter unrelated to any matter being handled for the

enterprise if the representation of one client is not directly adverse to the representation of the

other client. The propriety of concurrent representation can depend on the nature of the

litigation. For example, a suit charging fraud entails conflict to a degree not involved in a suit

for declaratory judgment concerning statutory interpretation.

Interest of Person Paying for a Lawyers Service

12. A lawyer may be paid from a source other than the client, if the client is informed of that

fact and consents and the arrangement does not compromise the lawyer’s duty of loyalty to

the client. See Rule 1.08(e). For example, when an insurer and its insured have conflicting

interests in a matter arising from a liability insurance agreement, and the insurer is required to

provide special counsel for the insured, the arrangement should assure the special counsel’s

professional independence. So also, when a corporation and its directors or employees are

involved in a controversy in which they have conflicting interests, the corporation may

provide funds for separate legal representation of the directors or employees, if the clients

consent after consultation and the arrangement ensures the lawyer’s professional

independence.

Non-litigation Conflict Situations

13. Conflicts of interest in contexts other than litigation sometimes may be difficult to assess

troversy in which they have conflicting interests, the corporation may

provide funds for separate legal representation of the directors or employees, if the clients

consent after consultation and the arrangement ensures the lawyer’s professional

independence.

Non-litigation Conflict Situations

13. Conflicts of interest in contexts other than litigation sometimes may be difficult to assess.

Relevant factors in determining whether there is potential for adverse effect include the

duration and intimacy of the lawyer’s relationship with the client or clients involved, the

functions being performed by the lawyer, the likelihood that actual conflict will arise and the

likely prejudice to the client from the conflict if it does arise. The question is often one of

proximity and degree.

14. For example, a lawyer may not represent multiple parties to a negotiation whose interests

are fundamentally antagonistic to each other, but common representation may be permissible

where the clients are generally aligned in interest even though there is some difference of

interest among them.

15. Conflict questions may also arise in estate planning and estate administration. A lawyer

may be called upon to prepare wills for several family members, such as husband and wife,

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and, depending upon the circumstances, a conflict of interest may arise. In estate

administration it may be unclear whether the client is the fiduciary or is the estate or trust

including its beneficiaries. The lawyer should make clear the relationship to the parties

involved.

16. A lawyer for a corporation or other organization who is also a member of its board of

directors should determine whether the responsibilities of the two roles may conflict. The

lawyer may be called on to advise the corporation in matters involving actions of the

directors

estate or trust

including its beneficiaries. The lawyer should make clear the relationship to the parties

involved.

16. A lawyer for a corporation or other organization who is also a member of its board of

directors should determine whether the responsibilities of the two roles may conflict. The

lawyer may be called on to advise the corporation in matters involving actions of the

directors. Consideration should be given to the frequency with which such situations may

arise, the potential intensity of the conflict, the effect of the lawyer’s resignation from the

board and the possibility of the corporations obtaining legal advice from another lawyer in

such situations. If there is material risk that the dual role will compromise the lawyer’s

independence of professional judgment, the lawyer should not serve as a director.

Conflict Charged by an Opposing Party

17. Raising questions of conflict of interest is primarily the responsibility of the lawyer

undertaking the representation. In litigation, a court may raise the question when there is

reason to infer that the lawyer has neglected the responsibility. In a criminal case, inquiry by

the court is generally required when a lawyer represents multiple defendants. Where the

conflict is such as clearly to call in question the fair or efficient administration of justice,

opposing counsel may properly raise the question. Such an objection should be viewed with

great caution, however, for it can be misused as a technique of harassment. See Preamble:

Scope.

18. Except when the absolute prohibition of this rule applies or in litigation when a court

passes upon issues of conflicting interests in determining a question of disqualification of

counsel, resolving questions of conflict of interests may require decisions by all affected

clients as well as by the lawyer.

Imputed Conflicts, Nonlawyer Employees, and Lawyers Formerly Employed in a

Nonlawyer Role

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en the absolute prohibition of this rule applies or in litigation when a court

passes upon issues of conflicting interests in determining a question of disqualification of

counsel, resolving questions of conflict of interests may require decisions by all affected

clients as well as by the lawyer.

Imputed Conflicts, Nonlawyer Employees, and Lawyers Formerly Employed in a

Nonlawyer Role

19. A law firm is not prohibited from representing a client under paragraph (f) merely because

a nonlawyer employee of the firm, such as a paralegal or legal secretary, has a conflict of

interest arising from prior employment or some other source. Nor is a firm prohibited from

representing a client merely because a lawyer of the firm has a conflict of interest arising from

events that occurred before the person became a lawyer, such as work that the person did as a

law clerk or intern. But the firm must ordinarily screen the person with the conflict from any

personal participation in the matter to prevent the person’s communicating to others in the

firm confidential information that the person and the firm have a legal duty to protect. See