Richard Zitrin's comment on proposed CA Rule 1.7 prompts me to float an idea for revising the rule to adopt more of a presumptive safe harbor approach. It entails spelling out in some detail what has to be disclosed, in return for a presumption that consent is valid.
I generally prefer standards to rules, so this is a departure for me, but it seems that sophisticated firms are already doing pretty much what I suggest (see Heller's letters in Zador and Visa/First Data) and lawyers who don't write many waiver letters could use some guidance. I have some concern that the existing comments may tempt lawyers unfamiliar with waivers to believe that open-ended waivers are easier to get and uphold than is likely to be the case.
The proposal leaves open the possibility of "open-ended" future waivers, which for me is entailed by the economic structure of fiduciary duties, but makes them hard to do.
Perhaps a vaguer, standards-based approach is better, but this approach seems worth discussing. Proposal below the line; comments welcome
1. Add Proposed Revised Rule 1.7(e) (under the current version; it would be (d) if my earlier proposal to modify (a) and drop (c) were adopted):
(e) A lawyer may ask a client to consent to the lawyer’s representation of interests that conflict with the client’s interests, or the lawyer’s future representation of interests that would conflict with the client’s interests. Such consent is effective only if the lawyer obtaining it demonstrates that he or she disclosed to the client information sufficient for the client to make an informed decision regarding the request. A lawyer may make such a showing by satisfying either of the following sections.
(1) Consent is presumptively effective if the lawyer provides in writing to the client: (i) a concrete description of the scope of the requested waiver, including but not limited to whether it would allow the lawyer to oppose the client in litigation or negotiations; (ii) explanations of (a) why the lawyer is asking for the waiver; (b) what benefits the lawyer expects to receive from it; (c) what risks it presents for the potential client; (d) the lawyer’s best estimate of the probability that those risks will occur; and (iii) a statement that because the request benefits the lawyer the client should consider asking other, disinterested counsel for advice on whether to agree to the request. With respect to waivers of future conflicts, such disclosure also must include a statement that such conflicts might arise in a context, and raise issues, the client could not presently anticipate.
(2) Failure to provide any element of disclosure specified in section (1) renders consent to a conflict or future conflict presumptively invalid. A lawyer may overcome this presumption only by showing by clear and convincing evidence that (i) the lawyer was unable to provide the disclosure required by that section; and (ii) the client nevertheless had sufficient information to make an informed decision regarding the waiver request.
2. Delete current comment 29, and replace with Proposed New Comment 29:
Under either section (e)(1) or (e)(2), to obtain valid consent to a present or future conflict a lawyer must provide the client an adequate basis for deciding whether to agree to the waiver. The lawyer must disclose such information in the way most likely to assist the particular client in understanding his or her stake in the request. To the extent possible, the lawyer must relate each category of information to the circumstances that led the client to employ the lawyer.
Whether a client’s decision was informed depends heavily on the client’s general sophistication and sophistication regarding legal services. Information sufficient for a sophisticated client might be meaningless jargon to an unsophisticated client, and it may be unnecessary to provide a sophisticated client the full extent of explanation needed to inform an unsophisticated client.
When representing multiple clients in a single matter, the lawyer must disclose the risk that circumstances might create incentives for the lawyer to favor one client over another, and the implications of joint representation for the confidentiality and lawyer-client privilege issues described in Comment [13]
If a lawyer shows by a preponderance of evidence that he or she provided the information required in section (1), a client’s corresponding consent will be presumed to have been informed, and therefore to be effective. If, in particular circumstances, a client needs additional information to make a decision, then the client’s consent is effective only if the lawyer provided such information. The client, however, would bear the burden of demonstrating that disclosure specified in Section (1) did not provide an adequate basis for his or her decision.
If a lawyer fails to provide the disclosure specified in Section (1) to a client in requesting a conflict waiver, the client’s consent is presumptively invalid. In some unusual cases, lawyers who fail to provide such disclosure may be able to demonstrate by clear and convincing evidence that a client’s consent was adequately informed. In such a case, the client’s consent would be valid. Any such showing must include an explanation of why the lawyer was unable to provide such to a client. A lawyer may not make the necessary showing if the lawyer was able to provide the disclosure required by Section One but chose not to do so. This rule is intended to void all consents in cases where a lawyer withheld information for strategic reasons.
“Open-ended” waivers, which by definition do not specify in advance the scope of the requested waiver, by definition, cannot be supported by the disclosure required by Section (1). They therefore are presumptively invalid. Such waivers are therefore valid, if at all, only if the requirements of section (e)(2) are met.
3. Delete current comment 33