by Robert K. Sall

There is no universally accepted methodology when it comes to checking for conflicts of interest, and no ethical rule in California mandates directly that a conflict check must be performed. While the California Rules of Professional Conduct (CRPC) prohibit undertaking or continuing representation of clients in various conflicted circumstances, these rules do not inform us how a conflict check should be performed or that a particular procedure is required. Nevertheless,

“[it is] an attorney’s duty to protect his client in every possible way, and it is a violation of that duty for him to assume a position adverse or antagonistic to his client without the latter’s free and intelligent consent given after full knowledge of all the facts and circumstances. [Citation.] By virtue of this rule an attorney is precluded from assuming any relation which would prevent him from devoting his entire energies to his client’s interests. Nor does it matter that the intention and motives of the attorney are honest. The rule is designed not alone to prevent the dishonest practitioner from fraudulent conduct, but as well to preclude the honest practitioner from putting himself in a position where he may be required to choose between conflicting duties, or be led to attempt to reconcile conflicting interests, rather than to enforce to their full extent the rights of the interest which he should alone represent.”

Flatt v. Superior Court, 9 Cal. 4th 275, 289 (1994) (quoting Anderson v. Eaton, 211 Cal. 113, 116 (1930) (emphasis in original)). Because lawyers have the affirmative ethical duty to refrain from representing parties with conflicting interests absent informed written consent and compliance with applicable law, the standard of care requires lawyers to utilize competence to detect and avoid conflicts.

The starting point for a conflicts analysis requires an understanding of the applicable rules governing conflicts. These rules, together with statutes and general principles relating to other fiduciary relationships, all help define the duty component of the fiduciary duty which the attorney owes to his or her client. Day v. Rosenthal, 170 Cal. App. 3d 1125, 1147 (1985). “The standards governing an attorney’s ethical duties are conclusively established by the Rules of Professional Conduct.” Id. Because it is our duty to conform to the rules and not engage in impermissible conflicts when representing clients, we need to consider how best to inform ourselves to be able to detect when there is a conflict, whether it is waivable, what must be disclosed, and whether we may obtain an informed consent.

Rule 1.7 of the CRPC sets forth specific prohibitions against undertaking representation where certain conflict situations exist. Rule 1.7(a) mandates that “[a] lawyer shall not, without informed written consent* from each client and compliance with paragraph (d), represent a client if the representation is directly adverse to the client in the same or a separate matter” (emphasis added). Rule 1.7(b) mandates that “[a] lawyer shall not, without informed written consent* from each affected client and compliance with paragraph (d), represent a client if there is a significant risk the lawyer’s representation of the client will be materially limited by the lawyer’s responsibilities to or relationships with another client, a former client or a third person,* or by the lawyer’s own interests (emphasis added). Rule 1.7(c), in relevant part, provides that “[e]ven when a significant risk requiring a lawyer to comply with paragraph (b) is not present, a lawyer shall not represent a client without written* disclosure of the relationship to the client and compliance with paragraph (d) where: (1) the lawyer has, or knows* that another lawyer in the lawyer’s firm* has, a legal, business, financial, professional, or personal relationship with or responsibility to a party or witness in the same matter.” Rule 1.7(d) mandates that representation is permitted under the rule only if the lawyer complies with paragraphs (a), (b) and (c), and “(1) the lawyer reasonably believes* that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; and (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal.” In reviewing the quoted rules, remember that an asterisk denotes a defined term, and one must refer to rule 1.0.1 (“Terminology”) to see the definition.

CRPC rule 1.9 addresses, inter alia, the prohibition of representation of a client adverse to a former client in a matter that is the same as the former representation or substantially related to it and where the lawyer learned confidential information that is material, unless the former client gives informed written consent.

CRPC rule 1.10 generally provides that a conflict of one lawyer in a firm will be imputed to all other firm lawyers in the absence of limited exceptions or screening under limited circumstances. If screening is implemented, this rule requires that written notice be promptly given to any affected former client to enable the former client to ascertain compliance with the provisions of this rule. This notice shall include a description of the screening procedures employed, and an agreement by the firm to respond promptly to any written inquiries or objections by the former client about the screening procedures.

Finally, CRPC rule 1.18 prohibits a lawyer from representing a client adverse to a former prospective client if the lawyer learned confidential information that is material to the matter as a result of the prior consultation.

If you are a managing or supervising lawyer in your firm, you have the professional responsibility to establish policies that will detect and resolve conflicts of interest. Comment [1] to rule 1.5, which addresses the Responsibilities of Managing and Supervisory Lawyers, states: “Paragraph (a) requires lawyers with managerial authority within a law firm* to make reasonable* efforts to establish internal policies and procedures designed, for example, to detect and resolve conflicts of interest . . . and ensure that inexperienced lawyers are properly supervised.” In general, the rule requires that any lawyer who individually or together with other lawyers possesses managerial authority shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that all lawyers in the firm comply with the rules and the State Bar Act. We therefore must have a policy and procedure, but receive no guidance as to what the procedure should be.

Several cases in California address the duty to run a conflict check. In some instances, the performance of a conflict check is a contractual term of the agreement between attorney and client. In Banning Ranch Conservancy v. Superior Court, 193 Cal. App. 4th 903 (2011), a disqualification case, the law firm had an engagement agreement with a municipality that provided a framework for representation in future matters, with the limitation that “before we can advise Client with respect to a particular matter, we will need to perform a ‘conflict check’ and otherwise confirm the Firm’s ability to take on the matter” (emphasis in original). Id. at 913-14. Because this required a conflict check as a condition precedent to undertaking new matters and there were no current matters then being handled as counsel for the city, a current attorney-client relationship was found not to exist for purposes of disqualification. Attorney-client relationships, however, are often undertaken without a contractual term requiring a conflict check. What does the standard of care require?

There is some guidance from the Standing Committee on Professional Responsibility and Conduct of the State Bar of California which has opined that “[T]he attorney should check for any potential conflicts with those who are adverse and potentially adverse, including reasonably foreseeable parties and witnesses, before accepting representation of a client” in any matter. Cal. Bar Formal Op. 2011-182, at 5 (addressing requirements of former rule 3-310) (emphasis added). The Committee’s opinion further recommends that if exigent circumstances prevent conducting a conflict check, the acceptance of representation should be contingent upon a subsequent conflict check revealing no conflicts and that the check be run as soon as possible. Id. Similarly, the Restatement of the Law Governing Lawyers provides there is no doubt that attorneys should adopt reasonable procedures to detect conflicts of interest. Restatement (Third) of Law Governing Lawyers § 121, Comment “g.”

There is also case authority regarding the duty to perform a conflict check. “It is the obligation of counsel to conduct an adequate conflicts check.” Fidelity & Guaranty Ins. Co. v. KB Home Coastal, Inc., No. LA CV13–00946 JAK (DTBx), 2014 WL 10485191 (C.D. Cal. July 7, 2014), at *8. A law firm “is charged with the responsibility of performing conflict checks when taking on a new client.” Image Tech. Services, Inc. v. Eastman Kodak Co., 820 F. Supp. 1212, 1217 (N.D. Cal. 1993). Notably, these cases recite that the client has no duty to detect conflicts.

Because the results of an incomplete or inadequate conflict check may be relevant in litigation, law firms have been required in discovery to produce a redacted version of the conflict check. See, e.g., In Re: The Subpoena To Produce Documents of Clapp, Moroney, Bellagamba, Vucinich, Beeman & Sheley, No. 14–mc–80191–RS (JSC), 2014 WL 3784112 (N.D. Cal. July 31, 2014) at *4.

Few cases, however, address in any detail the methodology to follow for checking conflicts. Drawing analogy to the disclosures that must be made by a lawyer serving as arbitrator, we find some critique on conflict checks that are found to be inadequate. In New Regency Productions, Inc. v. Nippon Herald Films, Inc., 501 F. 3d 1101 (9th Cir. 2007), the lawyer-arbitrator performed a conflict check that was deficient because it was run only on the names of the actual parties and did not include one party’s parent entity with whom there was a conflict. A Ninth Circuit decision addressing vacation of an arbitration award under federal law due to inadequate disclosure by the lawyer-arbitrator demonstrates the critical importance of running the conflict check. Schmitz v. Zilveti, 20 F.3d 1043, 1049 (9th Cir. 1994) (“That the lawyer forgot to run a conflict check or had forgotten that he had previously represented the party is not an excuse.”). The memory method of checking for conflicts is not the best.

Sometimes it gets very complicated. We know from the decisions in Brooklyn Navy Yard Cogeneration Partners v. Superior Court, 60 Cal. App. 4th 248 (1997) and Morrison Knudsen Corp. v. Hancock Rothert & Bunshoft, 69 Cal. App. 4th 223 (1999), which reached different conclusions regarding the basis for disqualification of counsel, that the identity of corporate parents and subsidiaries may be relevant and sometimes lead to conflicts. They may even require an alter ego analysis into the degree of connectedness between members of a corporate family. Although resolving that conflict is beyond the scope of this article, the important takeaway is that the lawyer undertaking a new legal representation should be aware of corporate familial relationships of parents and subsidiaries and who controls them as that may be relevant to the conflict analysis.

In undertaking a new representation, the identity of the potential adverse parties is critical, as is the identity of the prospective client. In order to run the names of the adverse parties and prospective client to ascertain whether a conflict exists, lawyers should know the identity of all existing and former clients, the principals who control decision making for them, the corporate family members such as parents and subsidiaries, the prospective clients who have previously consulted the firm but never became clients, the subject matter of such consultations or past representation, relevant dates, the identity of persons with whom the lawyer or another lawyer in the firm has a preexisting legal, business, financial, professional, or personal relationship, and the relationships of members of the firm to any prospective parties or witnesses in a matter.

No lawyer can reasonably be expected to maintain such detailed information by relying upon memory alone. Proper procedures for conflict checking necessitate having ready access to well-maintained data in a manner that is searchable and consistently updated to detect and avoid conflicts. The necessary information should be collected in every consultation and every engagement. The failure to have a database of such information available for ready access is a potential source of liability for malpractice or fiduciary duty claims and may lead to disqualification of the lawyer or firm. It may also result in clients who are very upset when they discover a conflict was not detected.

As recommended in the California Practice Guide, it is best to maintain a client database that records, in addition to all current clients and clients represented in the past, all corporate, partnership and other entity names, partner names, fictitious business names, principal officers and directors, members of LLPs and LLCs, names of parents, subsidiaries, corporate name changes, insurers involved, and other information including descriptions of subject matter of representation, names of the responsible attorneys and file names and numbers. Tuft & Mohr, Cal. Practice Guide: Professional Responsibility & Liability (The Rutter Group Dec. 2024 Update) ¶ 4.26.1. Similarly, the database should include identifiable “connections” such as key witnesses, expert witnesses, parties to mediations and arbitrations, lawyers who served as a mediator or arbitrator, and persons having economic ties to the firm. Id. at ¶ 4.26.2.

To comply with ethical duties and the standard of care, there should be a policy and procedure in place that is consistently followed. In a small firm, it may be possible to maintain a conflict database with a frequently updated list that includes all the necessary information, enabling the firm to run word searches against it to detect conflicts, along with circulating a conflict memo to all lawyers in the firm to ascertain their relationships with potential witnesses, parties, and former clients. However, this self-created method may be less reliable than using a commercially available program that prompts the entry of data necessary to detect conflicts. Regardless of method used, unless every lawyer and staff member routinely maintain the practice of collecting and entering the data, deficiencies will develop making the process less reliable. It is prudent to also have a method for secondary review by one who does not have the motivation to bring a particular client in. It is important to be thorough in maintaining the necessary information in the conflicts database, and keeping it up to date with every consultation and engagement, without exception.

Once using the database reveals a potential conflict, there should be a person within the firm whose responsibility it is to determine whether the representation is prohibited by law (such as representing adverse parties in the same litigation), whether the conflict is waivable following proper disclosure and informed consent, and whether the representation may be undertaken if an appropriate screen is established. In large firms, there is usually a dedicated conflicts department that exists for checking conflicts and has recognized procedures for making these determinations in consultation with the attorneys involved. In smaller firms, there should be a well-publicized internal procedure that is rigorously followed, and in which all professionals and staff who need to know are kept informed of the steps being taken to avoid conflicts or violation of the applicable rules. In all firms, proper communication and training are the key to evaluating and avoiding conflicts. As always, let’s be careful out there.

Robert K. Sall is Of Counsel to Sall Spencer Callas & Krueger in Laguna Beach. A Certified Specialist in Legal Malpractice Law by the State Bar of California’s Board of Legal Specialization, he testifies as an expert witness and lectures frequently on lawyer conduct, fee disputes, and legal ethics. He can be reached at rsall@sallspencer.com.