Advance waiver of conflicts

Painter, Richard W

INTRODUCTION

The American Bar Association (ABA) "Ethics 2000" Commission is proposing revisions to the Model Rules of Professional Conduct,1 including the rules governing client conflicts.2 Among the Commission's proposed revisions is a new comment to Model Rule 1.7 that may allow lawyers and clients to agree contractually that future conflicts shall be waived.3

This article discusses the circumstances in which lawyers and clients should be permitted to contractually set at the beginning of a representation their own rules governing futukre conflicts of interest. In appropriate circumstances, advance waivers of conflicts avoid unnecessary and expensive ex-post litigation over disqualification. On the other hand, blanket waivers by unsophisticated clients may reflect asymmetry of information and unequal bargaining power between lawyers and clients. Perhaps most important, advance waiver is difficult to use as a contracting device, if courts and bar association do not clarify the driteria for determining whether such a waiver is enforceable. Although the Commission's proposed revisions to Model Rule 1.7 are a step in the right direction, this article concludes that more specific language on advance waiver of conflicts should be incorporated into the Model Rules.

I. THE CONTRACTARIAN PERSPECTIVE ON CONFLICTS RULES

A. IMMUTABLE AND DEFAULT RULES

Contractarian economics distinguishes immutable rules from default rules. An immutable rule is a rule that cannot be changed by a contractual agreement. A majoritarian immutable rule is suitable for most parties in most situations, whereas a tailored immutable rule is designed for a specific subset of parties.4 A default rule, unlike an immutable rule, can be changed by a contractual arrangement.

Because lawyers are fiduciaries for their clients, courts and bar associations are wary of making some rules of professional responsibility default rules instead of immutable rules. Under the Model Rules, for example, lawyers cannot get client permission to commingle client funds with their own,5 put themselves in a client's will unless they are related to the client,6 or negotiate for literary or media rights prior to the conclusion of a representation.7 On the other hand, there are some situations in which lawyers and clients are allowed to contract around rules of professional responsibility. Rules governing client conflicts are a salient example; a client sometimes may consent to a conflicting representation.8

The three principal types of default rules are majoritarian default rules, tailored default rules and penalty default A majoritarian default rule is a rule that most contracting parties prefer. Other parties bargain around the default or, if bargaining costs are too high, live with the default even though for them it is suboptimal. Majoritarian rules save transaction costs because most parties have no incentive to contract around the default. Tailored default rules are majoritarian default rules that are designefor specific subgroups of contracting parties. A penalty default rule is a rule that most parties would not prefer, but which is imposed to induce parties to contract for their own tailored rule.9

Ex-ante contracting is completed before most relevent facts become known. For example, corporate shareholders and directors routinely agree ex-ante to provisions in corporate articles and shareholder agreements, and are bound by these contractual commitments ex-post. Corporate law scholars debate over whether fiduciary principles of contract should control when the two conflict,10 and criticism of contract focuses on information asymmetry between managers, on the one hand, and shareholders, on the other.11 Critics of the primacy of contract also point out that designing contract terms is difficult when future outcomes are difficult to compute.12 In recent years ex-ante contracts have been allowed to trump fiduciary duty in some areas in corporate law,13 but there are limits,14 and many issues, such as directors' conflicting interest transactions, are resolved ex-post.15

In the lawyer-client context also, contract and fiduciary principals clash if the client is contracting at a time when she does not know many of the relevant facts. For example, ex-ante contracts for contingent fees have been criticized on these grounds.16 For this reason, many default rules in professional responsibility contemplate ex-post contracting. The words "consent after consultation" appear regul 1y in professional responsibility codes17 and suggest that a consenting client s uld know all or most of the relevant facts before consent is obtained. On the er hand, there are circumstances in which lawyers and clients both benefit from ex-ante contracting over a future contingency, whether making the lawyer's fee contingent upon the results of litigation18 or agreeing ex-ante on how the lawyer will handle a problem such as conflicts of interest within an organizational client19 or client fraud.20

Finally, if default rules are used instead of immutable rules, do the default rules matter? At first glance, default rules do not appear to matter, because lawyers and clients can contract around them. Indeed, the Coase theorem holds that, assuming rationality, perfect information, and no transaction costs, it does not matter what the default rule is.21 However, there are transaction costs to contracting around default rules and furthermore lawyers and clients may have a cognitive bias against opting out of default rules and into other rules.22 Initial rule choice thus probably does matter. Default rules, and particularly penalty default rules, thus in some contexts impose unwanted social costs because contracting parties will simply stick ith a suboptimal default rule.

B. CONFLICTS RULES AS DEFAULT RULES

Jonathan Macey and Geoffrey Miller observe that the Model Rules governing client conflicts are the rules which, in general, lawyers and clients would agree on if they were to bargain for their own ruleS23 (in other words they are majoritarian default rules). Conflicts involving former government attorneys, however, are governed by tailored default rules that are in some ways more stringent than the rules for successive conflicts between two private sector clients24 and in some ways more permissive.25 Both the rules for former government lawyers and the rules for lawyers facing conflicts between private sector clients are default rules because clients may consent to conflicts after consultation.26

Alternatively, it could be argued that conflicts rules are sometimes penalty default rules. In transactional settings, for example, rules that prohibit lawyers from concurrently representing clients with adverse interests, even in unrelated matters,27 are penalty default rules. Lawyers routinely obtain permission to represent new clients on the opposite side of deals from existing clients whom they represent in other matters, and the frequency of these waivers suggests that a majoritarian rule would permit concurrent adverse representations in the transactional context unless one of the two clients objects. Model Rule 1.7, however, bars the representation unless consent is obtained. The use of a penalty default rule instead of a majoritarian rule in this context addresses the information asymmetry between lawyer and client by forcing the lawyer to disclose relevant information about both representations before the client consents.28

Conflicts rules are also penalty default rules in contexts where they are overbroad and taint representations outside their intended scope. Ambiguous standards for determining whether a matter is "substantially related"29 or an interest is "adverse"30 force lawyers to obtain client consent to conflicts even in situations where conflict prohibitions probably do not apply. Indeed, many lawyers will not undertake a representation even remotely adverse to a current client without first obtaining that client's consent.31

Finally, conflicts rules, unlike pure default rules, have an immutable component, itself enshrined in ambiguous standards, such as whether a client's consent was obtained "after consultation"32 or (for concurrent conflicts) whether the lawyer "reasonably" believed that she could represent both clients.33 It is the first of these immutable standards that casts a shadow over a client's ex-ante consent to a conflict.34 The possibility that courts might disqualify a lawyer by applying these immutable standards ex-post forces lawyers to carefully explain potential conflicts to their clients before obtaining consent, and sometimes to withdraw from a representation when circumstances change, even if consent has been obtained.

Penalty default rules in the conflicts area are problematic when there are substantial impediments to lawyers and clients contracting around these rules (penalty default rules by definition are not the majoritarian rules that most lawyers and clients would prefer). The immutable component to conflicts rules compounds the problem by discouraging contracts that arguably run afoul of the immutable criteria. Both penalty default and immutable components in conflicts rules are also worrisome if they create opportunities for strategic behavior that the parties would have wanted to prohibit ex-ante. In some contexts, such as concurrent conflicts in transactions, waivers are so routine that the contracting mechanism appears to function smoothly. In litigation, however, the first client often withholds consent even in circumstances where harm to the first client from the conflict is minimal or nonexistent (usually because the matters are entirely unrelated). Alternatively, the first client may grant consent, but continues to have leverage over the lawyer representing his adversary because the first client can subsequently withdraw consent. It is possible to avoid such opportunistic behavior by contracting around the default rule ex-ante, but doubts about the enforceability of ex-ante waivers compound problems already created by the parties' status quo bias in favor of default rules.35 The result is that both lawyer and client can be stuck with suboptimal default rules (whether majoritarian or penalty default rules). If lawyers worry about potential future conflicts with other clients that they would prefer to represent, these suboptimal rules in turn can prevent lawyer-client relationships from being formed in the first place, meaning some clients have fewer lawyers to choose among.

Although lawyers and clients alike might prefer to expand their options by defining their own rules governing future client conflicts, many decisions in the conflicts area thus are not made by the parties contractually, but by judges ex-post. It is no surprise that conflicts is one of the most litigated areas of professional responsibility.

II. Ex-ANTE CONTRACTING AROUND CONFLICTS DEFAULT RULES

It is clear from the foregoing discussion that conflicts rules poorly accommodate ex-ante contracting (commonly referred to as "advance consent").36 The words "consent after consultation" suggest that the consenting client should know all or most of the relevant facts about a conflict,37 and in most cases, lawyers ask their clients for conflict waivers only after the second client seeks representation, when most relevant facts about the conflict are known.38 If the first client says no, and the lawyer still insists on representing the second client, the first client, or sometimes a third party seeking to disqualify the lawyer, may go to court. Only occasionally is an enforceable waiver contracted for in advance.39

The advance waiver issue arose in 1897 when a federal district court in California, in In re Boone,40 refused to recognize in disbarment proceedings a written release stating that a former client "releases said Boone (the attorney) from all rights, burdens, obligations, and privileges which appertain to his said employment, and consents that said Boone may engage his services pro and con, as he may see fit."41 The court in Boone, however, had a grim view of the overall integrity of the attorney involved,42 and this might have affected the court's outlook on the written waiver. The issue came up again in Westinghouse Electric Corp. v. Gulf Oil,43 in which the Seventh Circuit in 1978 refused to enforce an alleged understanding between Gulf and a law firm hired by Gulf that the firm could continue to represent another longstanding client with potentially adverse interests to Gulf if a dispute between the two should arise.44 The Court emphasized that Gulf's purported consent to such a future conflict could not protect the law firm against a motion for disqualification based on the possibility of disclosure of confidential information,45 and noted that the attorney would also be disqualified under other rules of professional conduct.46

The majority of recent cases endorse a more flexible approach and give tacit support for advance waiver of conflicts.47 A few of these cases openly endorse ex-ante waivers, but many are fact-specific holdings that emphasize factors such as lack of confidential communications between the client agreeing to the waiver and the lawyer, lack of potential harm to the client agreeing to the waiver, and principles of estoppel. At least some courts, furthermore, adhere steadfastly to the view that contract principles cannot trump rules of professional responsibility and that an advance wawet is invalid if detailed information was not known at the time of the waiver about the specific conflict being waived.

A. KENNECOTT COPPER V. CURTISS-WRIGHT

In Kennecott Copper Corporation v. Curtiss-Wright Corporation,48 CurtissWright, in the fall of 1973, retained Skadden, Arps, Slate, Meagher & Flom in connection with a tender offer for Airco Inc. Skadden agreed to represent Curtiss-Wright in the Airco tender offer only if Curtiss-Wright agreed that Skadden would remain free to represent other target corporations which CurtissWright might seek to acquire. This condition, formalized in the retainer agreement, provided:

Should your corporation or any person affiliated with it seek to acquire or invest in any company which is a client of our office, we will be free to represent that client and the same shall not result in a reduction of the retainer.49

In February, 1977, Kennecott Copper Corporation retained Skadden in connection with a divestiture. Nine months later, Curtiss-Wright began buying up shares of Kennecott stock in the market and announced that it planned a proxy contest to gain control of Kennecott. In March of 1977, Kennecott responded by bringing suit against Curtiss-Wright for violations of the securities and antitrust laws, and Curtiss-Wright sought to disqualify Skadden from advising Kennecott's management with respect to the proxy fight. Curtiss-Wright alleged violations of Canons 4 and 5 of the Code of Professional Responsibility because Skadden still represented Curtiss-Wright in the still pending litigation over the Airco tender offer.

Judge MacMahon, in the Southern District of New York, however, observed that both Skadden and Curtiss-Wright's officers in 1973 "knew that CurtissWright's aggressiveness and Skadden, Arps's specialized practice might some day lead to a collision,"50 and that Curtiss-Wright "was not a regular client on a general retainer but a new, minor and `one shot' client on a particular retainer for the Airco matter only."51 The 1973 retainer agreement thus left Skadden "free to represent any client, past or future, in any takeover attempt, with no risk of disqualification, even though Curtiss-Wright happened to be the unfriendly corporate suitor or otherwise in an adversarial position."52 The conflict had been waived.53

B. UNIFIED SEWERAGE V. JELCO

In Unified Sewerage Agency of Washington County v. Jelco Corp., 54 Jelco, a Utah contractor, asked Kobin & Meyer, a Portland, Oregon law firm, to represent it in litigation over a compensation claim by Ace Electric, Jelco's electrical subcontractor for a sewer plant project in Portland. Kobin & Meyer told Jelco that it was currently representing Teeples & Thacher, a subcontractor for concrete work on the same project, in an embryonic dispute with Jelco over Jelco's scheduling on the project (the firm had represented Teeples & Thacher for ten years in other matters).55 Jelco, with full knowledge of the potential conflict, decided to retain Kobin & Meyer for the Ace Electric litigation, even after the dispute with Teeples & Thacher worsened and Kobin & Meyer filed suit against Jelco on Teeples's behalf. Kobin & Meyer repeatedly warned Jelco both of the potential for conflict and that it preferred to keep Teeples as a client if it had to choose, and Jelco repeatedly told the firm to continue representing it in the Ace litigation. Only several months after the Ace litigation was lost, and Jelco obtained new counsel in Salt Lake City, did Jelco discharge Kobin & Meyer from further work on the damages phase of the Ace litigation and file a motion to disqualify Kobin & Meyer from representing Teeples & Thacher.56 The District Court denied Jelco's motion and Jelco appealed.

Although Teeples & Thacher argued that Jelco was now a former client of Kobin & Meyer, the Ninth Circuit based its analysis on the fact that Kobin & Meyer had represented Jelco and Teeples & Thacher simultaneously.57 The default rule thus was not the standard for reviewing successive conflicts (measuring the representation against similarities in the litigation),58 but the stricter standard for concurrent conflicts (measuring the representation against the duty of undivided loyalty to each client).59 Disciplinary Rule 5-105(C), however, allows a lawyer to represent multiple clients, if both clients consent and it is "obvious" that the lawyer can adequately represent the interests of both.60 The Ninth Circuit held that this consent requirement had been met when Jelco was twice warned of the potential conflict and chose to continue Kobin & Meyer's retainer. "Jelco obviously no longer consents to Kobin & Meyer's representation of Teeples & Thacher," but "Jelco would be estopped from revoking its consent by everyone's reliance on its longstanding position."61

Although the Jelco holding on its surface appears to condone advance waiver of conflicts,62 it is considerably narrower; instead of articulating the circumstances under which advance consent is binding and cannot subsequently be revoked, the Court simply held (in a footnote) that a client's "longstanding" consent to a conflict coupled with reliance by others can amount to estoppel.63 Furthermore, Jelco's consent only satisfied part of the test for allowing multiple representations. The Ninth Circuit also found it "obvious" that Kobin & Meyer could exercise its independent professional judgment on behalf of both Jelco and Teeples & Thacher because there was "no substantial or close relationship between the subject matter of the Ace litigation and the subject matter of Teeples & Thacher litigation."64 In effect, Jelco's consent did not eliminate the conflict, but drove the court's scrutiny of the conflict back to the less rigorous "substantial relationship" standard that would have been applied had Jelco been a former instead of a present client of Kobin & Meyer. Thus, if both Ace and Teeples & Thacher had subcontracted to do electrical work on the project, and had similar grievances against Jelco, the case might have been decided differently.65

C. ELLIOTT V MCFARLAND UNIFIED SCHOOL DISTRICT

In Elliott v. McFarland Unified School District,66 several school districts agreed to allow the Kern County superintendent of schools to retain legal counsel for all of them. They each signed a "joint powers agreement" providing:

In the event that two or more parties hereto are unable to resolve a legal issue between them or among them without legal proceedings, the party or parties in contraposition to that of legal counsel as set forth herein on the legal issue involved shall secure its/their separate legal counsel at its/their own expense and apart from the costs, fees or liabilities for payments as set forth herein.67

Two years later, a teacher sued two of the districts, Kern and McFarland, over unused vacation days that had been lost when he transferred from one of the districts to the other, and the superintendent of schools retained School Legal Services (SLS) to represent both districts. When a conflict emerged between Kern and McFarland, SLS withdrew from representing McFarland, and McFarland moved to disqualify SLS from continuing to represent Kern on the grounds that the representation violated California State Bar Rules of Professional Conduct, Rules 4-101(68) and 5-102(B).69

The court held that the joint powers agreement "constitutes written consent" to the joint representation and to SLS's continued representation of Kern,70 although such waiver would not have been effective if SLS had obtained from McFarland confidential information pertaining to the representation.71 The Court observed:

[T]he parties in the instant case had entered into an agreement to preserve the benefits of common representation while anticipating the situation that arose. They recognized and attempted to resolve in advance the consequences flowing from possible conflicts between the participating public entities .... Included in that attempt was the express recognition of the privileged nature of information and the elements of confidentiality in matters affecting an individual district. To permit disqualification without a showing that privileged or confidential information had been imparted to SLS in connection with the prior representation would defeat the purpose of the agreement.72

Finally, the Court noted that "the delay and possible tactical abuse resulting from disqualification must be considered because of McFarland's long delay in bringing the disqualification motion."73 The motion was therefore denied.

D. INTERSTATE PROPERTIES V. PYRAMID

In Interstate Properties v. Pyramid Co.,74 Finley, Kumble, Wagner, Heine, Underberg & Casey in the mid- 1970's successfully represented Interstate Properties, the owner of a shopping mall in Utica New York, in opposing an application by Pyramid-Utica Company for a permit to construct a rival mall. Pyramid-Utica subsequently entered into a joint venture with Interstate to construct the new mall, and Pyramid-Utica retained Finley, Kumble to represent it in the joint venture's renewed application for the permit, which this time was granted. Impressed with Finley, Kumble's work, Pyramid's parent company, Pyramid Companies, then retained Finley, Kumble to obtain similar permits for properties it owned elsewhere in New York and Vermont, and in November 1979 Finley, Kumble became Pyramid Companies' general counsel responsible for "real estate/corporate/ business matters[.]"75 Differences arose in early 1980, however, between Pyramid-Utica and Interstate over financing arrangements for their joint venture in Utica, and in March of 1981 Finley, Kumble filed a lawsuit on Interstate's behalf against Pyramid-Utica. Finley, Kumble nonetheless continued to represent Pyramid Companies on environmental matters that arose on its other properties, and in 1982 Pyramid-Utica moved to disqualify Finley Kumble from representing Interstate in the litigation over the joint venture in Utica.

Judge Carter, of the Southern District of New York, observed that in order to expand its roster of clients, Finley Kumble had "tread perilously close to the border of the professionally irresponsible."76 Nonetheless, Pyramid Companies had given "repeated oral, and on one occasion written, waivers of its rights to object to Finley, Kumble's representation of Interstate in opposition to Pyramid entities."77 The written waiver, a letter of February 20, 1980, granted "express permission for [Finley, Kumble] to ... continue to act as general counsel for Interstate in any and all pending and future matters including any adversary proceedings that might arise between Interstate and Pyramid."78 The letter acknowledged that Pyramid was aware of Finley, Kumble's longstanding relationship with Interstate, that Pyramid was "represented by counsel of [its] own choosing in connection with the negotiation, revision, execution and delivery of the [joint venture] Agreement[,] ... that certain differences have arisen between [Pyramid] and Interstate pursuant to this Agreement and that [Finley, Kumble] has acted as Interstate's attorneys in connection with efforts to resolve those matters." The letter stated that there had been no confidential or privileged communications between Finley, Kumble and Pyramid which would inhibit the firm's representation of Interstate concerning the joint venture agreement and that Pyramid had not relied on advice from Finley, Kumble in reviewing or executing the agreement.79

Judge Carter observed that "[f]rom the outset, Finley, Kumble restricted its representation of Pyramid entities to assure that it would not conflict with Interstate's interests," and Finley, Kumble had even made clear "the understanding that, in order to avoid the possibility of conflict, it would not represent any Pyramid entity in the development of a site which Interstate might seek to develop as a competitor."80 Most important, Finley, Kumble had only done environmental permit related work for the Utica joint venture, and had steered clear of the financial aspects of the project which were now the subject of litigation between Pyramid-Utica and Interstate.81 Because Finley, Kumble's representation of Pyramid had thus been properly circumscribed, it was "obvious that Finley, Kumble's multiple obligations do not require divided loyalties,"82 and, under DR 5-105, Pyramid could consent to the conflict after consultation.

Pyramid's consent, the Court also found, had been informed. "PyramidUtica's contention that it was unaware that the joint venturers were having a serious dispute is not credible when read against the clear words of the waiver."83 The Court acknowledged that "the efficacy of the waiver to immunize Finley, Kumble's actions from sanctions" under Canon 4 and DR 4-101 requiring an attorney to preserve the confidences and secrets of a client "is less established,"84 but also pointed out that there was little evidence that Pyramid communicated confidential information to Finley, Kumble.85 Furthermore, the terms of the waiver itself "can be read to eliminate any possibility, however slight, that confidential information might have been acquired from PyramidUtica during its relationship with Finley, Kumble that will now be used to Pyramid-Utica's disadvantage."86

Although this case appears to give the green light to advance waivers of conflicts, the Court implicitly acknowledges some limits to ex-ante contracting. The Court did not approve a waiver where the law firm had represented the client in a matter substantially related to the present litigation, and in fact suggested that it would not be "obvious" that a law firm could give independent advice to both clients in such a situation.87 The Court also suggested that the efficacy of a waiver almost certainly would be undermined if there were independent evidence that the law firm had received confidential information from the client that could now be used against it in litigation. Finally, the "informed consent" requirement was easy to meet in Pyramid because at the time of the waiver the client was aware of both the identity of the other client and the basic parameters of the potential conflict (a dispute over the Utica joint venture).

E. FISONS V. ATOCHEM

In Fisons Corporation v. Atochem North America, Inc.,88 Fisons Corporation in 1988 acquired a pharmaceutical division from Atochem North America, Inc., formerly known as Pennwalt Corporation. Dechert Price & Rhoads, which had been Pennwalt's primary outside counsel for more than thirty years, had represented Pennwalt both in the sale of the pharmaceutical group to Fisons and in trademark disputes involving the pharmaceutical division's products which were still pending when the division was sold to Fisons. Fisons requested that Pennwalt allow Dechert Price to continue its representation in two of these trademark disputes, but Dechert Price was concerned that it might be conflicted from representing Pennwalt in any future litigation between Pennwalt and Fisons over the purchase agreement. Thus, Pennwalt insisted that Fisons consent in advance to Dechert Price's representation of Pennwalt in any subsequent litigation between the two companies, and on October 28, 1988, Pennwalt's senior vice president and general counsel, wrote to Fisons:

Of course, my concern would be that there be no impediment to Pennwalt's continued use of Dechert [Price] in the unlikely event of any future need to do so in regard to any disputes that might arise between Pennwalt and Fisons. Accordingly, if Fisons is willing to assure us that Fisons and its affiliates will not seek to disqualify Dechert [Price] from representing Pennwalt in disputes with Fisons in matters unrelated to DES litigation or Allerest-Alleract and related trademark oppositions, Pennwalt would be willing to consent to Dechert [Price's] continuing representation in those matters .... 89

John M. Bailey, group secretary and counsel for Fisons, responded in a letter to Pennwalt dated October 31, 1988:

I confirm that I have no wish to prevent your continued use of Dechert Price and Rhoads in regard to any disputes that might arise between Pennwalt and Fisons merely as a result of their representation of us on DES litigation, the Allerest/Alleract matter and related trademark oppositions unless the dispute between our respective companies is a result of one or all of the aforementioned situations.90

In reliance upon this consent, Dechert Price agreed to represent Fisons in the trademark disputes.

In February 1990, Fisons sued Atochem, claiming that Pennwalt committed fraud and breach of warranty by concealing manufacturing and regulatory problems with a cough medicine manufactured by the pharmaceutical division that it had sold to Fisons. Fisons moved to disqualify Dechert Price from representing Atochem in the suit. Although Dechert Price clearly had a conflict because it was concurrently representing Fisons in the trademark disputes, the Court found that Fisons had consented to the conflict in Bailey's October 1988 letter:

Fisons had to be aware, either through past business dealings or at the very least through Pennwalt's letter of October 28, 1988, that litigation between Atochem and Fisons could arise out of Fisons' acquisition of the pharmaceutical group. Fisons also knew that Dechert Price had a long standing relationship with Pennwalt and would accept Fisons as a client only on the condition that its representation not preclude Dechert Price from continuing to act as Pennwalt's counsel. Pennwalt's October 28 letter alerted Fisons to a potential conflict of interest when it informed Fisons that its sole concern was Dechert Price's ability to continue to serve as Pennwalt's counsel. Obviously, it was the potential conflict of interest that necessitated Pennwalt's need to obtain Fisons' consent. It appears that in Fisons' informed judgment it was far more important that it obtain the benefit of Dechert Price's familiarity with the ongoing trademark dispute than it was to avoid facing any adverse consequences due to its attorney's conflict of interest. Thus, despite the known potential conflict of interest, in its October 31 reply letter, Fisons wholeheartedly assured Atochem that Fisons would not object to Dechert Price's future representation of Atochem in an action between Atochem and Fisons, qualified only by its exception of certain specified litigations. In other words, Fisons agreed to the dual representation at issue.91

In Fisons, the Court made it clear that adequate disclosure had been made to Fisons, particularly in view of its sophistication as a client,92 and that the disclosure need not include the exact nature of the future dispute that could arise between Fisons and Atochem.93

F. WORLDSPAN V. SABRE GROUP

Worldspan LP, et al. v. The Sabre Group Holdings, Inc.94 reveals a sharply different, and much more restrictive, approach to advance waivers. Alston & Bird, a large Atlanta law firm, for several years represented Worldspan, the operator of a computerized travel reservation system linking the public to airlines and other service providers. Alston & Bird represented Worldspan in tax matters in Georgia and Tennessee and in 1992 obtained from Worldspan a consent to future conflicts in unrelated matters.95 Six years later, Worldspan sued Sabre, an affiliate of American Airlines96 that competed with Worldspan in the operation of computerized reservation systems, alleging theft of trade secrets, fraud and antitrust violations. When Alston & Bird appeared for Sabre in the litigation, Worldspan moved to disqualify.

Federal District Judge Charles A. Moye, Jr. refused to find that Worldspan had consented to the representation, and pointed out that contract principles cannot trump rules of professional responsibility:

The law firm, however, relies on its "standard" engagement letter sent to plaintiffs when their first representation was undertaken, September 16, 1992, to show that plaintiffs then prospectively gave the required consent to the present simultaneous, dual representation in this lawsuit commenced over five years subsequent to the claimed consent.... The client-lawyer relationship is sui generis; it is based on mutual trust; it has important public implications beyond the mere relationship between the parties; it is not a mere contractual arrangement such that contract law relating to releases and waivers forms very persuasive precedent, nor does the court find such precedent helpful here. The requirements of this court's rules governing the conduct of lawyers practicing before it, and, of course, of the Georgia Code of Professional Responsibility, transcend mere contract law. The language of an engagement letter, while important to determine the nature and scope of any consent to representation of other clients, and to what extent such consent, if any, is "informed", does not definitively circumscribe the scope of the lawyer's professional responsibility under the circumstances.

The Court then refused to distinguish this case from one in which an unsophisticated and unrepresented client signs an ex-ante waiver:

While not applicable here as experienced lawyers for plaintiffs were monitoring the engagement of the law firm, in the more normal situation, the lawyer, presumably possessing superior legal knowledge and experience, is presenting the prospective client with a document with legal implications prepared by the lawyer having possibly adverse effects on the client seeking his legal advice and to repose trust in him. It is the lawyer's duty to insure that each client has all the necessary information to make consent truly informed. The Court must determine whether the 1992 letter did in fact evidence an informed prospective consent to the precise simultaneous, dual representation undertaken in this case.97

The Court went on to hold that the consent was not informed because the letter was ambiguous in not explicitly describing the conflict being waived:

Looking only at the original letter itself, the Court finds that its very language is ambiguous .... It is the opinion of this Court that future directly adverse litigation against one's present client is a matter of such an entirely different quality and exponentially greater magnitude, and so unusual given the position of trust existing between lawyer and client, that any document intended to grant standing consent for the lawyer to litigate against his own client must identify that possibility, if not in plain language, at least by irresistible inference including reference to specific parties, the circumstances under which such adverse representation would be undertaken, and all relevant like information.98

Judge Moye thus found that the waiver was ambiguous because it did not provide that Alston & Bird could litigate against Worldspan during its representation of Worldspan, even though the waiver seemed to contemplate the possibility of litigation when it provided that Alston & Bird would "not be precluded from representing clients who may have interests adverse to Worldspan."99 Perhaps more important, hardly any advance waiver would meet the criteria for specificity that Judge Moye demanded. Furthermore, although Judge Moye acknowledged that "experienced lawyers for [Worldspan] were monitoring the engagement of [Alston & Bird]," he treated the waiver as if it had been given in "the more normal situation" where an uninformed client is not independently represented by counsel.100 Finally, Judge Moye cast doubt on the enforceability of advance waivers in general by stating that, in his view, principles of professional responsibility "transcend mere contract law.101

G. THE ABA FORMAL OPINION AND THE ALI RESTATEMENT

ABA Formal Opinion 93-372: Waivers of Future Conflicts of Interest, allows lawyers in some circumstances to seek advance consent. The Opinion, however, weakens advance consent as a contracting device by making no promises as to its enforceability. Indeed, the criteria that the Opinion uses to determine whether an advance consent is valid resemble criteria used to determine whether there is a conflict in the first place, in effect depriving the advance consent of much of its significance:

It is the view of the Committee that it is not ordinarily impermissible to seek such prospective waivers; that the mere existence of a prospective waiver will not necessarily be dispositive of the question whether the waiver is effective; that such waiver will ordinarily be effective only in circumstances in which the lawyer determines that there is no adverse effect on the first representation from undertaking the second representation and that the particular future conflict of interest as to which the waiver is invoked was reasonably contemplated at the time the waiver was given; and that consent to a conflicting representation does not in itself constitute consent to the lawyer's disclosure, or use against the client's interest, of information relating to the representation under Rule 1.6. It is also the Committee's view that any such waiver should be in writing.102

The Committee furthermore observes that "[i]nformed consent is as necessary for effectiveness of a prospective waiver as for a contemporaneous waiver, but in the nature of things the consent is much less likely to be fully informed."103 In concluding, Opinion 93-372 states the obvious: "[g]iven the foregoing analysis, one principle seems certain: no lawyer can rely with ethical certainty on a prospective waiver of objection to future adverse representations simply because the client has executed a written document to that effect.104 The ABA thus subjects advance consent to ex-post judicial review based on so many factors that, under its approach, few lawyers and clients could benefit by including an advance consent term in their retainer agreement.

The American Law Institute is more accommodating of advance consents. Section 202 of the Restatement of the Law Governing Lawyers, comment d, provides:

d. Consent to future conflicts. Client consent to conflicts that might arise in the future is subject to special scrutiny, particularly if the consent is general. A client's open-ended agreement to consent to all conflicts normally should be ineffective unless the client possesses sophistication in the matter in question and has had the opportunity to receive independent legal advice about the consent.... On the other hand, particularly in a continuing client-lawyer relationship in which the lawyer is expected to act on behalf of the client without a new engagement for each matter, the gains to both lawyer and client from a system of advance consent to defined future conflicts might be substantial. A client might, for example, give informed consent in advance to the types of conflicts that are familiar to the client. Such an agreement could effectively protect the client's interest while assuring that the lawyer did not undertake a potentially disqualifying representation.105

Unlike the ABA Opinion, which allows contracting around conflicts with certainty only ex-post (after a conflict arises), the Restatement defines some circumstances in which lawyers and clients may contract around conflicts rules ex-ante. Nonetheless, ambiguity remains. For example, it is not clear what is meant by the client's "sophistication in the matter in question." Furthermore, the Restatement provides that unless a client has both such sophistication and the "opportunity to receive independent legal advice," a client's "open-ended agreement to consent to all conflicts" is ineffective, but the Restatement does not clearly identify which types of advance consents are effective if the client is sophisticated and has the opportunity to receive independent legal advice. The Restatement merely alludes to "informed consent in advance to the types of conflicts that are familiar to the client." In short, the Restatement avoids a clear rule and instead falls back on a list of criteria for determining whether an advance consent is enforceable: the client's sophistication, the client's opportunity to obtain independent advice of counsel, and the client's familiarity with the type of conflict waived.

The Ethics 2000 Commission, in its proposed revisions to Model Rules 1.4 and 1.7, incorporates some of the language of the ALI Restatement. First, the Commission proposes replacing the words "consent after consultation" throughout the Model Rules with "gives informed consent.106 The definition of "informed consent," largely taken from the Restatement, 107 appears in proposed revisions to Model Rule 1.4:

(c) As used in these Rules, "informed consent" denotes the agreement of a person to a proposed course of conduct after the lawyer has communicated reasonably adequate information and explanation regarding the material risks of and reasonably available alternatives to the proposed course of conduct.108

A proposed comment to Model Rule 1.4 describes the relevant factors for determining whether information given was "reasonably adequate." These include the client's sophistication and in "some circumstances" whether the client was independently represented at the time the consent was obtained.109 The proposed comment also recognizes that "[t]he communication necessary to obtain such consent will vary according to the Rule involved and the circumstances giving rise to the need for disclosure."110

The Commission also proposes to amend Model Rule 1.7(b) to require "informed consent in writing" to concurrent conflicts between clients, and to add a comment [13] on advance consent to Model Rule 1.7:

Whether a lawyer may properly request a client to waive conflicts that might arise in the future is subject to the test of paragraph (b). If the consent is general and open-ended (i.e., the client agrees to consent to any future conflict that might arise), then the consent ordinarily will be ineffective because it is not reasonably likely that the client will have understood the material risks involved. On the other hand, if the client is a sophisticated user of the legal services involved and agrees to consent to a particular type of conflict with which the client is already familiar, then the consent should be effective with regard to that type of conflict. For example, a bank that hires a lawyer to defend it in litigation might be willing to agree in advance to have the lawyer represent borrowers in loan transactions but not in resisting collection proceedings brought by the bank. The propriety of the client's consent must be determined not only at the time it is first given but also at the time when the waiver is sought to be implemented to determine if the circumstances at the time of the conflict are what was earlier expected.111

The proposed comment thus appears to condition enforceability of an advance consent on two criteria: that the client be a "sophisticated user of the legal services involved" and that the client consent to "a particular type of conflict with which the client is already familiar." Neither of these criteria is defined further. Although the bank lawyer example illustrates advance consent to representation in a transaction, this example is not helpful in litigation, the setting in which conflicts issues are most likely to be disputed. The comment fails to clarify how much familiarity the client must have with a specific type of litigation consented to (for example, whether the client must know in advance the names of the parties, the subject matter, and/or the legal issues involved), and does not explain whether an advance consent may be obtained for broad categories of litigation (for example, to any litigation not substantially related to a current representation). Perhaps most troubling is the "second look" required by the last sentence of the comment. Because circumstances usually do change over time, the specter of ex-post inquiry into whether "the circumstances at the time of the conflict are what was earlier expected" will cast a long shadow over advance waivers. Instead of being a gap-filling device to interpret ambiguous waivers, ex-post inquiry into the expectations of the parties will be a prerequisite for enforcement of all waivers, even those embodied in the most unambiguous language.

In short, the proposed revisions to Model Rules 1.4 and 1.7 facilitate judicial review of advance waivers by focusing attention on some important criteria such as the client's sophistication and opportunity to obtain independent representation, and familiarity with the conflict waived. However, the proposed revisions ultimately take the Model Rules little further than where ABA Opinion 93-372 left off. Particularly given the ex-post second look contemplated by the proposed comment to Model Rule 1.7, it will still be true that "no lawyer can rely with ethical certainty on a prospective waiver of objection to future adverse representations simply because the client has executed a written document to that effect."112

IV. A PROPOSED FRAMEWORK FOR ADVANCE WAIVER OF CONFLICTS

A. THE ISSUES

Lawyers and clients should, where possible, have bright line rules telling them when advance waivers are enforceable. Without bright line rules, a lawyer will likely charge an unaffordably high fee or refuse to represent a client if she believes that the cost of possible future disqualification from representing other clients is too high. This will be so even if the prospective client would have preferred to waive some future conflicts in return for the lawyer's representation. Curtiss-Wright, Jelco, the McFarland School District, Pyramid-Utica, Fisons, and Worldspan all sought representation from lawyers who were subject- to possible future conflicts and sought to contract around this contingency.113 The more ambiguity there is in the criteria for enforcement of advance waivers, the more likely it is that prospective clients in similar positions, who prefer, for whatever reason, representation by a particular lawyer or law firm, will simply be turned down.

One criteria on that could become the basis for a bright line rule - whether the client is independently represented by counsel - is alluded to in both the ALI Restatement and the proposed revisions to the Model Rules,114 but is not used in either code as the basis for a rule. Separate representation admittedly is not an exact proxy for eradication of the information asymmetry and unequal bargaining power between lawyer and client.115 However, separate representation goes a long way toward educating the client about the types of conflicts that could arise in the future, the impact of such conflicts on the client, and alternatives to representation by a lawyer who seeks unreasonably broad waivers. Separately represented clients are also likely to be business entities or well-to-do individuals well positioned to use this information to bargain over the terms of the waiver, or to bargain for representation by a different lawyer that does not require the waiver. Because separate representation can make such a substantial difference, this article proposes that the Model Rules should use this easily made distinction as a starting place for determining whether advance waivers are enforceable.

Courts thus should generally enforce a waiver if it is unambiguous and the client is independently represented by another lawyer, including in-house counsel, at the time the waiver is given. Ex-post evaluation of the waiver's reasonableness should be reserved for circumstances in which the waiver is ambiguous or the client was not independently represented at the time the waiver was given. Clarity will also be encouraged if an ambiguous waiver is construed againt the lawyer, who in most circumstances will have drafted it.116 On the other hand, courts should not follow the Worldspan Court and find a waiver to be ambiguous simply because it does not describe the particular conflict in question.117 Finally, advance waiver of conflicts should not be a one-way street; lawyers and clients should be free to expand the scope of conflicts rules in some respects while contracting their scope in others.

The major issues that could be addressed ex-ante are more specifically discussed below.

Who is the Client?

It is often not clear whether parent, subsidiary, and sibling corporations should be treated as a single entity for conflicts purposes. Over a strong dissent, an American Bar Association Committee stated in Formal Opinion 95-390(118) that Model Rule 1.7 did not require a lawyer to obtain a current corporate client's consent before accepting an unrelated representation potentially adverse to an affiliate of the client unless 1) "the circumstances are such that the affiliate should also be considered a client of the lawyer;" 2) "there is an understanding between the lawyer and the corporate client that the lawyer will avoid representations adverse to the client's corporate affiliates"; or 3) "the lawyer's obligations to either the corporate client or the new, adverse client, will materially limit the lawyer's representation of the other client."119 Corporate clients may respond to Formal Opinion 95-390 by insisting that lawyers also represent their subsidiaries for conflicts purposes,120 but law firms also may state in retainer agreements that they do not represent a corporate client's subsidiaries and affiliates.121 Even if the lawyer and client choose the latter route and attempt to contract around a potential conflict, however, this may not end the matter. The lawyer could still be disqualified because an ex-post decisionmaker determines either that "the circumstances are such that the affiliate should also be considered a client of the lawyer;"122 or that "the lawyer's obligations to either the corporate client or the new, adverse client will materially limit the lawyer's representation of the other client."123

Related problems arise in the context of joint ventures, close corporations, and other cooperative business arrangements. One joint venturer may retain a lawyer to represent it in negotiating entry into the venture, and then ask the same lawyer to advise all of the joint venturers in matters that concern the venture as a whole. The lawyer's advice to the venture as a whole may result in a conflict if the first joint venturer later seeks the lawyer's representation concerning a break-up of the joint venture."' Whether the lawyer switched to representing the venture as a whole, or merely provided advice to the venture in the course of representing the first joint venturer, is a question of fact that may be litigated if one of the other joint venturers seeks disqualification. Alternatively, a lawyer may represent a group of investors in setting up a close corporation and then find herself disqualified from representing the corporation if a minority shareholder later sues the corporation.125 Once again, a critical issue of fact in any subsequent litigation over disqualification will be whether the lawyer represented each of the investors individually, or the corporation as a whole.

In many cases, it would be preferable for problems such as these to be worked out contractually ex-ante rather than through ex-post judicial determination. Indeed, a well drafted retention agreement usually specifies the persons) or entity(ies) that is (are) the lawyer's client. In some specific areas, however, many retention agreements could be clearer. For example, a lawyer and a corporate client could specify:

(a) that certain subsidiaries and affiliates of the client are / are not to be considered clients of the lawyer;

(b) that certain persons entering into joint ventures with the client are / are not to be considered clients of the lawyer;

(c) that an entity such as a joint venture, partnership or close corporation is / is not a client of the lawyer

(d) that individual partners of a partnership or shareholders in a close corporation are / are not to be considered clients of the lawyer representing the partnership.

With respect to each of these categories, the retainer agreement could limit client status to certain enumerated persons or entities. Alternatively, the retainer agreement could extend client status to entities not yet in being by providing general descriptions of subsequently created entities that would achieve client status (for example, "all subsequently created subsidiaries of Client X" or "any future parent corporation that shall acquire Client X").

Both the lawyer and client would be encouraged to state their intentions ex-ante with more specificity (whether they choose to narrow or expand the definition of the lawyer's "client") if the legal system would unequivocally enforce their agreement in subsequent litigation over disqualification. The ambiguities inherent in current standards used to identify the client should only be imposed on a lawyer who fails to identify the client in advance or who fails to reveal the identity of the client to third parties who reasonably expect that they are clients of the lawyer.126

2. What is an Adverse Interest?

The "adverse interest" standard for conflicts in Model Rule 1.7 and Model Rule 1.9 is not easy to define, although it is an improvement over the even more ambiguous "differing interests" standard in the 1969 Model Code,127 and the definition of "conflicting interest" in Canon 6 of the 1908 Canons.128 Some courts compound the confusion further by finding an impermissible conflict when an adverse effect on one of the two clients is possible, even if a substantial adverse effect cannot presently be shown.129 For example, it is not clear whether there is an "adverse interest" sufficient to trigger disqualification in either of the following situations:

- A lawyer represents X Corp. in acquiring a parcel of real estate on which X Corp. plans to construct a shopping center and the lawyer knows that X Corp. may in the future want to acquire an adjoining parcel on which to expand the shopping center. Nonetheless, the lawyer concurrently represents another client in acquiring the adjoining parcel on which the second client plans to build a competing shopping center.130

- A lawyer represents Z Corp. in negotiating a joint venture with Y Corp. and at the same time represents another client that is suing Y Corp. over the failure of an unrelated joint venture. A judgment against Y Corp. in this lawsuit would probably cause Y Corp. to withdraw from the negotiations with Z Corp., resulting in substantial opportunity costs to Z Corp.

Another area fraught with ambiguity is the "positional" conflict of interest that arises when a lawyer advocates on behalf of one client a legal argument that is inconsistent with an argument advanced on behalf of another client.131 In some circumstances, the inconsistent arguments may undermine each other or the lawyer may pursue one client's cause less vigorously out of fear of harming that of the other.

Lawyers and clients should in some circumstances be allowed to avoid or lessen the ambiguity surrounding these situations by defining ex-ante what is and is not an "adverse interest." For example, a lawyer and a corporate client could specify in the retainer agreement that, under certain agreed upon circumstances:

(a) an economic competitor of the first client does / does not have interests that are adverse to the first client;132

(b) a potentially adverse interest is / is not an adverse interest;

(c) a certain category of legal work, such as negotiating on the opposite side of a transaction from a client, is / is not representation of an adverse interest;133 and

(d) a positional conflict is / is not an adverse interest;134

In general, clients will probably prefer more narrowly drawn exceptions on the adversity issue, whereas lawyers will usually prefer the flexibility of more open-ended waivers. So long as the client is independently represented by counsel, however, bargaining over retention terms rather than ex-post judicial decision-making should define what is and is not an adverse interest. Lawyers and clients will also have to confront the fact that, when potential adversity issues are raised, "attitudinal" negotiation are likely to be high. For this reason, lawyers and clients will sometimes prefer to bypass a contractual definition of adversity and live with the ambiguous default rules, even if they more precisely define other aspects of potential future conflicts.

3. What is a Substantially Related Matter?

A definition of what is and is not a "substantially related" matter136 is important for former client conflicts, where a substantial relationship between the two representations is required for there to be a conflict.137 Whereas the Model Code applied a vague "appearance of impropriety" standard138 to determine whether two matters were substantially enough related to give rise to an impermissible conflict,139 this standard is gone in the Model Rules and courts now rarely mention it when deciding conflicts cases.140 Today, courts generally apply what Professor Wolfram calls a "factual-reconstruction test" aimed at reconstructing both the former and proposed representations with a "focus sharply on protecting the original client's legitimate expectations of confidentiality."141 Professor Wolfram acknowledges that this test has its own uncertainties and other practical difficulties; for example, the more fact-specific the inquiry is, the higher the risk of disclosing the very information that conflicts rules were designed to protect. 142 Nonetheless, the "factual-reconstruction test" is probably the best approach available for determining ex-post whether there is a substantial relationship.

A substantial relationship can also arise in circumstances where the lawyer attacks, on behalf of a new client, work product, such as a patent or a standard form contract, that the lawyer created for a prior client.143 The justification for the "attack own work prohibition" is loyalty rather than confidentiality based without the prohibition, either client can fall prey to an undermotivated lawyer who constructs a weak legal edifice on behalf of the first client that is vulnerable to attack on behalf of the second, or who instead launches a less than vigorous attack on behalf of the second client on a legal edifice that the lawyer would be embarrassed to see fail.144 Once again, however, the parameters of the prohibition are not always clear, particularly when work product is the result of collaborative effort by several unaffiliated lawyers,145 or the lawyer's work product is arguably distinct from the instrument that the lawyer seeks to attack.146

Finally, there is the "playbook" problem in which a former client claims that a lawyer who learned information of very general nature - such as strategies for negotiating transactions, launching hostile takeovers, or settling litigation should be disqualified from a broad range of adverse representations in which that information might be useful.147 The Restatement rejects a sweeping version of the playbook argument, but leaves the door open for more narrowly tailored claims.148 A few courts have taken a more expansive view.149

In many circumstances, lawyers and clients could benefit by agreeing ex-ante to reduce the uncertainties inherent in ex-post application of the factualreconstruction test, disputes over the attack-own-work prohibition, and potential playbook arguments. Retainer agreements could address at least some of these issues by stating what is or is not a "substantially related" matter and when a subsequent representation should be allowed to proceed, even though two matters are substantially related. For example, a lawyer and a client could specify in the retainer agreement:

(a) that a subsequent matter will not be substantially related to a matter worked on by the lawyer unless confidential information is imparted to the lawyer in the first matter that could be used adversely to the client in the second matter;150

(b) that transactions entered into by the client within a certain time frame are are not substantially related to a matter worked on by the lawyer;151

(c) that certain categories of transactions are / are not substantially related to a matter worked on by the lawyer;152

(d) that certain categories of transactions engaged in by a subsidiary or affiliated entity of the client are / are not "substantially related" to a transaction of the client;153

(e) circumstances in which the lawyer is / is not free to attack her own work; 154 and

(f) circumstances in which "playbook" arguments would / would not be waived.155

In each case; the lawyer and client should have an opportunity to expand as well as to contract the definition of a substantial relationship that will trigger an impermissible conflict.156 Lawyers and clients who fail to address these issues would be subject to the factual reconstruction test and the attack-own-work doctrine as default rules, although there should also be a default rule that playbook arguments are not alone a basis for finding a substantial relationship unless otherwise agreed.

4. Should Concurrent Conflicts Rules Apply only to Substantially Related Matters?

A lawyer is generally barred from representing a client with an interest adverse to a current client even if the two matters are unrelated, whereas, if the first client is a former client, the matters must be "substantially related" for the second representation to be barred.157 Although both loyalty and confidentiality concerns are heightened when a lawyer is concurrently representing clients with adverse interests, the sweeping prohibition of concurrent conflicts rules can sometimes be intolerable. Many lawyers respond by not taking on a new client who might in the future have interests adverse to current clients, knowing that once they begin representing a client, they will not be permitted to represent other clients in matters where the first client's interests are adverse.

Lawyers and clients should be allowed to avoid these problems by agreeing ex-ante that the substantial relationship test will apply to current client conflicts. This is in essence what happened in Interstate Properties v. Pyramid and in Fisons v. Atochem.158 In both of these cases the court based its enforcement of an advance waiver in large part on its finding that the matters were not substantially related. This is also what Alston & Bird argued in Worldspan v. Sabre, although in that case the court refused to enforce the waiver.159 Although the risk of adverse use of confidential information is increased by a waiver that imposes the substantial relationship test on concurrent conflicts, information learned in an unrelated representation is generally of limited value and the client is furthermore still protected by separate prohibitions on disclosure or adverse use of client information (Model Rules 1.6 and 1.8(b)).

5. When Does a Representation End?

"Sunset concepts" generally define when a representation ends.160 Relevant criteria include resolution of open legal matters (such as an appeal), the client's decision-to retain new counsel, and, most important, the reasonable expectations of the lawyer and client.161 When a representation ends, is in turn, critical for determining whether rules for former client conflicts (Model Rule 1.9) apply instead of the more stringent rules for concurrent conflicts (Model Rule 1.7).162 A wise lawyer will either specify in the retainer letter when a representation ends, or send a termination letter at its conclusion. A lawyer, however, rarely wants to send a letter telling a client that the representation is over unless a conflict with another client actually arises. Even then, the lawyer may simply assume that the representation of the first client is over without sending a termination letter, a situation ripe for disqualification litigation if the first client finds out about the lawyer's representation of an adverse interest and objects. Failure to deal with this issue at the outset of a representation can thus lead to a costly misunderstanding later on.

Furthermore, most courts prohibit a lawyer from dropping a client like a "hot potato" in order to take advantage of more liberal former client conflicts rules.163 A termination letter which a court later deems to have been premature thus may be invalid164 This "hot potato rule" and uncertainty in its ex-post judicial application in turn discourage a lawyer from taking on a client whose interests could later conflict with those of a more important client. A lawyer-client relationship thus may never get started simply because the lawyer does not have the right - a right that the client always has165 - unilaterally to terminate the relationship. A lawyer and client presumably could contract around the hot potato rule by agreeing ex-ante that the representation shall have a defined duration or that the lawyer may resign at will from representing the client. Alternatively, the lawyer and client could agree that the lawyer may resign if the client later refuses to give consent to the lawyer's representation of another client with an adverse interest in an unrelated matter.

6. When Should the Former Client Conflict Ban Cease to Apply?

Model Rule 1.9 does not specify a time after termination of a representation when former client conflicts rules shall cease to apply. Although most old matters become less "substantially related" to current matters as time passes, there is no specified time when the conflict disappears. Ambiguity in judicial application of the substantial relationship test thus creates a penalty default rule that forces the lawyer to seek out and obtain consent of a former client of perhaps decades earlier before taking on an adverse representation. If the new matter involves litigation, the former client is likely to refuse the request, forcing the lawyer to choose between litigating a disqualification motion and withdrawal. Anticipating such opportunistic behavior on the part of former clients, lawyers (particularly lawyers who represent plaintiffs) will often spend their careers avoiding clients that they might one day want to sue (usually large corporations, municipalities and other organizations).166

Lawyers and clients could in some circumstances avoid these problems by contractually agreeing at the outset of a representation to limit the duration of former client conflicts (for example, to ten years after conclusion of the representation). A professional responsibility code that strove for majoritarian default rules instead of penalty default rules might even provide that former client conflicts shall expire after a certain period of time (for example, ten years) unless the lawyer and client agree otherwise. Although clients might in some instances want the conflicts bar to last until confidential information would no longer be of value in representing adverse interests, it is important to recognize that expiration of the conflicts bar would not lift the doctrinally distinct bar on disclosure-or adverse use of confidential information.

7. Co-Clients

A lawyer may initially be retained by a client with whom she has a longstanding relationship and then be asked by that client also to represent other persons or entities with aligned interests.167 Once the lawyer has agreed, the conventional wisdom is that the lawyer must withdraw from representing any of the clients if they develop adverse interests in the matter.168 For this reason, many lawyers may be reluctant to enter into such joint representations, and the first client may be reluctant to ask. This might be so even if the persons or entities involved would have gladly accepted the lawyer's representation with the understanding that, if adverse interests should emerge they would seek alternative representation while the lawyer continued to represent the first client.

Co-clients should thus be permitted to agree ex-ante that their lawyer may subsequently represent one of the clients in the matter, or in another substantially related matter, even if an adverse interest among the clients later emerges. Their agreement could specify that the lawyer would continue to represent (i) certain clients) named in the agreement (ii) those clients) whom the lawyer chooses to represent or (iii) those clients) having interests aligned with a particular legal position agreed upon in advance. The latter approach was in essence the understanding embodied in the "joint powers agreement" for the retention of counsel that the school districts had agreed to, and the court upheld, in Elliott v. McFarland Unified School District.169

8. Screening

The Model Rules provide for imputed disqualification of an entire firm if one of its lawyers is disqualified from a representation.170 The Model Rules also do not allow firms to use screening to avoid imputed disqualification, unless the conflict arises because a former government lawyer joins the firm.171 Many courts strictly apply the Model Rules approach and do not allow law firms to use screening to avoid imputed disqualification, particularly in conflicts between concurrent clients,172 although other courts have become increasingly receptive to screening.173

As law firms grow in size and lawyers move around more, law firms will want the opportunity to screen their lawyers from conflicts between two private sector clients. Increasing pressure thus will be put on bar regulators to allow screening to avoid imputed disqualification in former client conflicts, and possibly even in concurrent conflicts.174 This is also presumably a term that some lawyers would bargain for if given the opportunity to negotiate ex-ante with their clients over conflicts rules. Even if bar regulators do not decide to permit screening, or decide to limit screening to certain types of conflicts, lawyers and clients should at least be permitted to contract ex-ante so that imputed disqualification of an entire firm can be avoided by screening conflicted lawyers within the firm.

9. Congruent Interest Conflicts for Former Government Lawyers

Former government lawyers are barred from so called "congruent interest" conflicts as well as "adverse interest" conflicts.175 The default rule, for example, prevents a former lawyer for the Justice Department antitrust division from suing Microsoft on behalf of a private client for antitrust violations if that lawyer "participated personally and substantially"176 in the Justice Department's suit against Microsoft.177 The government agency involved can consent to the subsequent congruent interest representation, but the default rule is usually opted out of, if at all, on a case-by-case basis after the lawyer leaves the government and seeks to represent a private client in a substantially related matter.178

Government agencies might benefit from an advance waiver with respect to congruent interest representations. The waiver would make it easier for the government to recruit lawyers and would prevent subsequent litigation over a category of conflicts in which the government has relatively little interest. So long as former government lawyers were still subject to the bar on substantially related adverse representations,179 the risk to the government would be minimal. The advance waiver, if given to a broad category of government lawyers, would also assure that government lawyers holding like positions would be treated alike, whereas case-by-case ex-post waivers can lead to arbitrary distinctions by former supervisors. Finally, in situations where an appearance of impropriety actually is created by a former government lawyer "exploiting public office for the advantage of a private client,180 the government agency could refuse to give the advance waiver, in which case the default rule barring congruent interest as well as adverse interest representations in the same matter would continue to apply.181

B. THE PROPOSAL

Advance waivers should be as specific as possible with respect to the types of matters in which future representation of an adverse interest is permissible. Such clarity in the ex-ante waiver is critical to accomplishing what the waiver was intended to accomplish: avoidance of ex-post litigation over disqualification.

For this reason, the author of this article has proposed that the Model Rules should allow a lawyer and a client to make a binding agreement at the outset of the representation, or at any time during the representation, with respect to (i) the specific criteria generally used to determine whether there is an impermissible conflict, or (ii) a specific type of conflict. This author's Proposal182 first suggests that the Ethics 2000 Commission make the following revisions to the Model Rules of Professional Conduct:

Model Rule 1.7 should be amended to add a paragraph (c) providing:

"(c) a lawyer and a client independently represented by separate counsel, including an in-house counsel, may enter into a written agreement specifying one of more of the following:

(i) a definition of who the "client" is for purposes of this rule;

(ii) a time when a representation ends for purposes of this rule;

(iii) a definition of what is or is not "directly adverse" for purposes of this rule;

(iv) that conflicts between two concurrent clients shall only be grounds for disqualification if the matters are "substantially related" as well as a definition of what is or is not a "substantially related" matter; and

(v) that the client consents in advance to a specific type of conflict."

Model Rule 1.9 should be amended to add a paragraph (d) providing:

"(d) a lawyer and a client independently represented by separate counsel, including an in-house counsel, may enter into a written agreement specifying one of more of the following:

(i). a definition of who the "client" is for purposes of this rule;

(ii) a time after termination of the representation when the restrictions set forth in this rule shall cease to apply;

(iii) a definition of what is or is not a "substantially related" matter;

(iv) a definition of what is or is not a "materially adverse" interest; and

(v) that the client consents in advance to a specific type of conflict."

Proposed items (i) through (iv) for both Model Rule 1.7 and Model Rule 1.9 ar# self explanatory, and, where a definition is called for, allow the lawyer and client to expand as well as to contract the reach of default rules in the caselaw governing client conflicts. The consent to a "specific type of conflict" in item (v) is intended to encompass waivers that address other specific issues, such as special arrangements among co-clients,183 the waiver in Kennecott Copper which referred to Curtiss-Wright's subsequent attempts to acquire another client of the law firm,184 and the waiver in Fisons which contemplated the law firm's continued representation of Pennwalt in any dispute that might arise out of the acquisition agreement.185 To be enforceable, however, the waiver need not specify the particular conflict that subsequently arises or the parties involved.186 The waiver rather need only describe a "specific type of conflict" which is waived, and that type could include all conflicts not falling within a certain category (e.g. "Client consents to Firm's representation of any client in any matter other than a matter related to Client's compliance with the antitrust laws.").

In addition, lawyers and clients should be allowed to agree ex-ante that imputed disqualification of a law firm will be avoided if the affected lawyers are screened from any participation in a matter to which the conflicts rules would otherwise apply:

Model Rule 1. 10 should be amended to add a paragraph (d) providing:

"(d) A lawyer and a client independently represented by separate counsel, including an in-house counsel, may enter into a written agreement that imputed disqualification of a law firm will be avoided if the lawyers involved in a matter are screened from any participation in another matter to which this rule would otherwise apply."

The comment to Model Rule 1.10 should state that lawyers and clients can agree ex-ante on what the appropriate screening procedures will be.187

Second, the Proposal suggests that advance waivers should be uniformly enforced, but only when the client is independently represented at the time of the waiver by a lawyer, including in-house counsel, who is unaffiliated with the lawyer receiving the consent. In such cases, the advance consent is unlikely to be affected by asymmetry of information and bargaining power between the lawyer and client. This bright-line rule is preferable to making enforceability of the waiver contingent upon the client being "sophisticated."188

Third, the Proposal suggests that the comments to Model Rules 1.7 and 1.9 should point out that advance waivers do not allow lawyers to disclose confident tial client information in violation of Model Rule 1.6. Use of confidential client information to the client's disadvantage without the client's consent should also continue to be prohibited under Model Rule 1.8(b). The comments, however, should also state that, once a conflicting representation is consented to, the client giving consent (and any other complaining third party) will have the burden of showing specific facts establishing that the lawyer has misused confidential information in order for the lawyer to be disqualified or sanctioned for her conduct. Otherwise, specious claims of misuse of confidential information would eviscerate the advance conflict waiver. Furthermore, clients that are independently represented by counsel should be bound by written statements to their lawyers, such as that which Pyramid gave to Finley, Kumble in Interstate Properties,189 stating that there were no confidential communications between them or that only confidential information relevant to certain subjects was exchanged.

Retainer agreements that include advance waivers could also provide for prophylactic devices that reduce the risk that client information will be used in a subsequent adverse representation. For example, the retainer could include an undertaking by the law firm to screen any of its lawyers involved in representing the client from involvement in the firm's representation of a second adverse client. The retainer could also include an undertaking that the firm would, at the conclusion of the firm's representation of the client, return to the client, store in sealed containers or destroy, all relevant files, including internal memoranda and computer records,'90 concerning the matter.191 Although such measures will not eliminate the risk of adverse use of confidential information, they will sharply reduce the anticipated cost of the waiver to the client, making it more likely that, when viewed ex-ante, these costs will be outweighed by the anticipated benefit of the waiver to the lawyer.

CONCLUSION

Some lawyers currently use retention letters to contractually set rules governing future conflicts of interest. Lawyers and clients will contract around conflict rules more extensively, however, if courts clarify when advance waivers of conflicts are enforceable. Courts and bar disciplinary committees, therefore, should uniformly enforce such waivers in cases where the client giving the waiver was independently represented by counsel at the time the waiver was given. Courts should also encourage clarity in advance waivers by construing ambiguous provisions against the lawyer that received the waiver. A waiver, however, should not have to specify the particular conflict involved in order to be upheld as unambiguous. If enforced uniformly, advance waivers of conflicts will help lawyers and clients alike avoid unnecessary and expensive ex-post litigation over disqualification.

1. MODEL RuLES OF PROFESSIONAL CONDUC (1999) [hereinafter MODEL RULES].

2. Draft Rules and Explanatory Memos for Public Comment, Memorandum from E. Norman Veasey, Chair, posted Mar. 23, 1999 at http://www.abanet.org/cpr/e2k/draftrules.html.

3. See id. See discussion of proposed Rule 1.7 - Public Discussion Draft, cmt. 13 (describing circumstances in which a lawyer may properly request a client to waive conflicts that might arise in the future). See text accompanying notes 106-11, infra (discussing the proposed revisions to Model Rule 1.7).

4. For example, securities lawyers are subject to tailored standards of professional responsibility set by the Securities and Exchange Commission. See In re Carter and Johnson, Exchange Act Release No. 34-17597, [1981 Transfer Binder] Fed. Sec. L. Rep. (CCH) 182,847 (Feb. 28, 1981) (announcing prospectively the

obligations of a securities lawyer whose client is failing to satisfy disclosure requirements); SEC Rule 102(e), 17 C.F.R. section 201.102(e)(1)(ii) (1996) (providing that the SEC may for "unethical or improper professional conduct" temporarily or permanently deny to any person the privilege of practicing before the Commission after notice and hearing).

5. MODEL RULES Rule 1.15.

6. MODEL RuLEs Rule 1.8(c).

7. MODEL Rum Rule 1.8(d),

8. See MODEL RuLEs Rules 1.7 and 1.9; text accompanying note 26, infra.

9. See Ian Ayres & Robert Gertner, Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules, 99 YALE L.J. 87, 91-93 (1989) [hereinafter Ayres & Gertner, Default Rules].

10. See generally ROBERTA RomANo, TnE GEms oF AMERICAN CORPORATE LAw (1993) (advocating use of default rules as corporate governance norms) and FRANK H. EASTERBROOK and DANiEL R. FISCHEL, THE ECONOMIC STRucruRE OF CORPORATE of CottPOxwxn Law (1991) (same). Several commentators, however, express concern about default rules premised on real or perceived contracts between fiduciaries and their entrustors. See, e.g., William W. Bratton, Jr., The New Economic Theory of the Firm: Critical Perspectives from History, 41 STAN. L. REV. 1471 (1989); William W. Bratton, Jr., The Nexus of Contracts Corporation: A Critical Appraisal, 74 CORNELL L. REv. 407 (1989); Tamar Frankel, Fiduciary Duties as Default Rules, 74 Op. L. REv. 1209, 1267

(1995) ("We should reject the view that all rules applicable to public fiduciaries are default rules no matter how tenuous the 'contract' bargain around [those] rules.").

11. See William W. Bratton, Corporate Finance: Dividends, Noncontractibility, and Corporate Law, 19 CARDozo L. REv. 409, 410 (1997) ("the incomplete contracts models suggest that information asymmetries in particular problems of ex post observation and verification - structurally delimit the class of subject matter suited to travel on this track of evolutionary improvement.")

12. Id. at 422-23 ("[T]o have 'contract' terms that govern future states, those contingent states must be specified and the future outcomes must be computable. Since some future states of nature clearly are not computable, transacting parties as a result will lack the technology necessary to enable the negotiation and composition of a contract term ex ante.")

13. For example, Delaware's General Corporation Law, with certain exceptions, permits a corporation to include in its certificate "a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders" for breach of the duty of care. See Del. Gen. Corp. Law 102(b)(7). See also ABA Revised Model Business Corporation Act 2.02(b)(4) (allowing for exculpation of directors in an even broader range of circumstances). Charter option provisions such as these are controversial. See e.g., Lucian Arye Bebchuck, Limiting Contractual Freedom in Corporate Law: The Desirable Constraints on Charter Amendments, 102 HARv. L. REv. 1820, 1836-37 (1989) (pointing out that costs of obtaining information prevent shareholders from understanding the impact of provisions in corporate charters that decrease shareholder value).

14. See Del. Gen. Corp. Law 102(b)(7) (not permitting exculpation of directors who breach their duty of loyalty to the corporation).

15. See ABA Model Business Corporation Act, Sections 8.60, 8.62, 8.63 (providing for approval of a director's conflicting interest transaction by a majority of disinterested directors or shareholders, but only after disclosure by the director with the conflicting interest of the existence and nature of the conflicting interest, and of all facts known to him that a reasonably prudent person would believe material to a judgment of whether or not to proceed with the transaction).

16. See Lester Brickman, Contingent Fees without Contingencies: Hamlet without the Prince of Denmark?, 37 UCLA L. REv. 29,127 (1989).

17. See e.g. MODEL RULES Rule 1.8(b) (use of client information to the disadvantage of the client); MODEL RuLES Rule 1.8(f) (accepting compensation for representing a client from one other than the client); and MODEL RULES Rule 1.8(g) (making an aggregate settlement of claims of or against two or more clients). The "consent after consultation" language also appears throughout the rules governing client conflicts. See MODEL RULES Rules 1.7, 1.9, and 1.11.

18. See MODEL RULES Rule 1.5(c) (permitting contingent fees).

19. See American Lawyer's Code of Conduct, Rule 2.5 (1982). Rule 2.5 allows corporate clients to choose policies that their lawyers are required to follow in resolving conflicts of interest among the board of directors, officers, and shareholders, but the Rule also requires that the chosen policies be disclosed to shareholders and corporate officers beforehand. The comment to the Rule points out that publication to shareholders puts the shareholders "in a position to approve or disapprove that policy, or to relinquish their shares." Id., ch.Ii cmt.

20. See Richard W. Painter, Toward A Market for Lawyer Disclosure Services: In Search of Optimal Whistleblowing Rules, 63 GEO. WASH. L. REv. 221 (1995) (suggesting that lawyers and clients be permitted to agree ahead of time that the lawyer shall disclose client crime or fraud). See also Richard W. Painter, Proposal to the Ethics 2000 Commission to Amend Model Rule 1.13, reprinted in THE PROF. Law. (ABA), Spring 1998 at 10 (proposing that a lawyer be required to report an organizational client's prospective crime or fraud to the client's full board of directors, unless the client opts out by amending its articles to provide that the report be made elsewhere within the organization).

21. Ronald H. Coase, The Problem of Social Cost, 3 J.L. & EcoN. 1 (1960).

22. See Russell Korobkin, The Status Quo Bias and Contract Default Rules, 83 CORNELL L. REv. 608 (1998) [hereinafter, Korobkin, Status Quo Bias].

23. Jonathan R. Macey & Geoffrey P. Miller, An Economic Analysis of Conflict of Interest Regulation,.82 IOWA L. REv. 965 (1997). For another economic analysis of conflict of interest rules, see Richard A. Epstein, The Legal Regulation of Lawyers'Conflicts of Interest, 60 FoRDHAm L. REv. 579, 582 (1992).

24. Former government attorneys are barred from so called "congruent interest" conflicts as well as "adverse interest" conflicts, Compare MODEL RULEs Rule 1.9 (Conflict of Interest: Former Client) (prohibiting a lawyer who has formerly represented a client in a matter from representing another person "in a substantially related matter in which that person's interests are materially adverse to the interests of the former client"), with MODEL RuLES Rule 1.11 (Successive Government and Private Employment) (providing that "a lawyer shall not represent a private client in connection with a matter in which the lawyer participated personally and substantially as a public officer or employee" regardless of whether the subsequent representation is adverse to the government). See text accompanying notes 179-81 infra (discussing possibility of advance waiver by a government agency of congruent interest conflicts).

25. A law firm is permitted to screen a former government lawyer so his entire firm will not be disqualified. Compare MODEL RULEs Rule 1.10 (Imputed Disqualification: General Rule) (no allowance for screening) with MODEL RULEs Rule 1.11 (Successive Government and Private Employment) (permitting the lawyer's firm to participate in the matter if the disqualified lawyer is properly screened and received no portion of the fee therefrom and the appropriate government agency is given written notice to allow it to ascertain compliance with the rule).

26. See MODEL RULES Rule 1.9 (providing that the representation may proceed with the consent of the former client after consultation), and MODEL RULEs Rule 1. 11 (providing that the representation may proceed with the consent of the government agency after consultation).

27. See MODEL RULEs Rule 1.7(a) ("A lawyer shall not represent a client if the representation of that client will be directly adverse to another client" unless "the lawyer reasonably believes the representation will not adversely affect the relationship with the other client" and "each client consents after consultation.").

28. See Ayres and Gertner, Default Rules, supra note 9 (discussing penalty default rules as information forcing rules).

29. See MODEL RULES Rule 1.9 (former client conflicts); Charles W. Wolfram, Former-Client Conflicts, 10 GEO. J. LEGAL ETHICS 677, 681 and 727-28 (1997) (discussing ambiguities in the "substantial relationship" standard used to evaluate former client conflicts).

30. See MODEL RuLEs Rule 1.7 (requiring that a representation be "directly adverse" to trigger,fn impermissible conflict) and MODEL RULES Rule 1.9 (requiring that a representation be "materially adverse" to trigger an impermissible conflict). The provisions of the Model Code are even more ambiguous. See MObtL CODE OF PROFESSIONAL RIsPoNsiaeorrsmn.rrr, DR 5-101(A) (a lawyer "shall decline preferred employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, or if it would be likely to involve him in representing differing interests, except to the extent permitted under DR 5-105(C)") and DR 5-105C ("a lawyer mlay represent multiple clients if it is obvious that he can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each.") [hereinafter MODEL CODE].

31. Jason Scott Johnston has observed that a contingent ex-post entitlement bestowed by a default standard will in some instances facilitate bargaining around the default because the party possessing the entitlement has less incentive to hold out and delay, if not permanently stall, negotiations than does a party holding a definite ex-ante entitlement from a well defined default rule. The risk of losing the right entirely through erroneous judicial interpretation of a standard instead creates an incentive to negotiate. Jason Scott Johnston, Bargaining Under Rules Versus Standards, VII J. LAw, EcON. & ORo. 256 (1995). The ambiguous standards used in conflicts rules are a good example. A lawyer has a contingent ex-post entitlement to represent a client whose interests are not "adverse" to another current client and to represent a client with interests adverse to a former client if the second matter is not "substantially related" to the first. In close cases, however, these ambiguous default standards facilitate bargaining around the lawyer's entitlement through consultation with clients who either agree to affirm the default rule (give consent) or seek to change it (persuade the lawyer not to go ahead with the representation although it appears that the lawyer is entitled to proceed). Lawyers who refuse to seek informed consent in close cases risk an erroneous ex-post judicial determination that their assessment of adversity or substantial relationship was wrong.

32. See MODEL RULES Rule 1.7 (requiring "consent after consultation") and MODEL RULEs Rule 1.9 (same). 33. See MODEL RuLEs Rule 1.7 (requiring that "the lawyer reasonably believes that the representation will not adversely affect the relationship with the other client").

34. See text accompanying notes 36-47, infra.

35. See Kotobkin, Status Quo Bias, supra note 22; text accompanying notes 21-22, supra.

36. See Il;ESTATE^MEN OF THE LAw GOVERNING LAwYERS, 202, cmt. d (Proposed Final Draft, 1996) (discussing advance consent to conflicts). [hereinafter .

37. See generally Comment, Prospective Waiver of the Right to Disqualify Counsel for Conflicts of Interest, 79 MicH. L. REV. 1074 (1981).

38. Ironically, the one area in which ex-ante contracting around conflicts rules is becoming more common involves some of the least sophisticated clients, the purchasers of liability insurance policies. Insurance defense lawyers retained by an insurance company to represent the insured are generally thought to represent both*the insurance company and the insured simultaneously, if their retainer agreement (the terms of which are dictated by the insurance policy) says so. See Charles Silver and Kent Syverud, The Professional Responsibilities-of. Insurance Defense Lawyers, 45 DuKE L. J. 255, 274 (1995). This is apparently so even if the insurance policy is a contract of adhesion signed by an insured person who lacks the sophistication to understand the conflicts that could arise between themselves and the insurer and to evaluate the professional responsibility terms they are agreeing to ex-ante.

39. It is worth noting that conflict of interest problems in corporate law also are generally resolved with ex-post contracting. See ABA Model Business Corporation Act, Sections 8.60, 8.62, 8.63, discussed in note 15, supra.

40. In re Boone, 83 Fed. 944 (N.D. Cal. 1897) (attorney disbarred for representing a client for nine years in

the protection of patent rights, and then, after ending the representation, seeking employment by the opposite side in another case concerning these same patents.")

41. Id. at 955 ("that he (the former client) would thus willingly and freely consent, apparently without the slightest objection or hesitancy, to furnish his adversaries in this very same litigation with weapons with which to contest, and, possibly defeat, his valuable rights ... is ... almost unworthy of credence.... [M]en endowed with the ordinary business sense and experience do not enter into such remarkable and prejudicial engagements.").

42. See id.

43. 588 F.2d 221 (7th Cir. 1978). 44. Id. at 227.

45. "Disqualification based on the potential for abuse of confidential information, however, involves different considerations which preclude the effectiveness of consent, particularly a vague, general consent given or implied prior to the threat of disclosure or adverse litigation.... Accordingly, we hold that a simple consent by a client to representation of an adverse party is not a defense to that former client's motion for disqualification, such as the one under review here, based on the possibility that confidential information will be used against the former client." Id. at 229. See also, id., n. 9 (" Of course, this is not to say that a client may not consent to any disclosure of confidential information. Certainly he may, for example, desire to permit public release of certain confidential information or release of the information to other attorneys, witnesses or parties assisting in his case. See EC 4-2, 4-3. We are only holding that clients will not be deemed to have consented to the use of confidential information in subsequent litigation against them.")

46. "For example, disqualification may be sought under Canon 5, which requires that a lawyer `exercise independent professional judgment on behalf of a client.' " Westinghouse Electric Corp. v. Gulf Oil, 588 P2d at 229. '

47. In City of El Paso v. Soule, a federal judge recently invalidated a consent that had been obtained afti a conflict arose but before the conflict was fully explained to the waiving client. The circumstances of this waiver, however were different from the typical advance consent which is obtained before either the lawyer or the client is aware of the nature of a future conflict. Here, the lawyers did not adequately inform the client of what they knew when they obtained the waiver - that they intended to sue the client - and the Court rightly observed that no rational client that had been adequately informed would have signed the waiver:

On the other hand, the Court does merit Salas-Porras Jr.'s testimony that he would not have endorsed the waiver letter had he known that he personally, members of his family, and corporations associated with the Salas-Porras family would be targeted by the City in this cause. The Court does not accept

that a sophisticated businessman such as Salas-Porras Jr. would knowingly and willingly do such a thing. Had Salas-Porras Jr. been fully aware of the scope of the pending litigation, the Court does not believe he would have acquiesced. The Court thus finds the waiver letter invalid.

City of El Paso v. Soule, 6 F Supp. 2d 616, 625 (W.D. Tex. 1998).

48. Kennecott Copper Corporation v. Curtiss-Wright Corporation, (S.D.N.Y.) (MacMahon, J) (Memorandum and Order, April 10 1978).

49. Id. at 3.

50. Id. at 6.

II 114

52. Id. at 7. The Court found that there was "no merit to Curtiss-Wright's contention that the waiver is limited to the list of Skadden, Arps' clients existing on November 2, 1973 when the retainer agreement was made." Id. at 7-8.

53. "Curtiss-Wright agreed to that condition and thus waived any objection it might otherwise have to Skadden, Arps' dual and simultaneous representation of Curtiss-Wright and a Curtiss-Wright target company:7 Id. at 7.

54. 646 F. 2d 1339 (9th Cir. 1981). 55. Id. at 1342-43.

56. Id. at 1343.

57. Id. at 1345, n.4, (citing Fund of Funds, Ltd. v. Arthur Anderson & Co., 435 F. Supp. 84, 95 (S.D.N.Y.1977), affd in part, rev'd in part rev'd in part on other grounds, 567 E2d 225 (2nd Cir. 1977)).

58. Id. at 1344 ("Under Canon 4 an attorney may not represent interests adverse to a former client if the

factual context of the later representation is similar or related to that of the former representation."). Id. The Court applied the Code of Professional Responsibility of the State of Oregon. Id. at 1342. Because Oregon's Canons 4, 5 and 9 were identical to the Canons 4,5 and 9 in the Model Code, the opinion also refers to decisions from jurisdictions that had adopted the Model Code. Id.

59, Id. at 1345, citing Code of Professional Responsibility of the State of Oregon, DR 5-105(B) ("A lawyer shall not continue multiple employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by his representation of another client, except to the extent permitted under DR 5-105(C).").

60. Id. at 1345, n. 5, quoting DR 5-105(C) ("In situations covered by DR 5-105(A) and (B), a lawyer mAy represent multiple clients if it is obvious that he can adequately represent the interests of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each.").

61. Id. at 1346, n.6.

62. See Ellen M. Sullivan, Note, Unified Sewerage Agency v. Jelco, Inc.: The Client's Right to Consent to Potential Conflicts of Interest, 11 CAP. U. L. REv. 625 (1982).

63. Unified Sewage Agency of Washington County v. Jelco Corp., 646 F. 2d 1339, 1346, n.6 (9th Cir. 1981). 64. Id. at 1351.

65. Id. ("Although the two actions arose out of the same construction contract between Jelco and Unified Sewerage, the nature of the cases is quite different.")

66. 165 Cal. App. 3d 562 (Cal. Ct. App. 1985). 67. Id. at 805.

68. See Cal. State Bar Rules of Prof. Conduct [hereinafter Cal. Rules] Rule 4-101 (providing: "A member of the State Bar shall not accept employment adverse to a client or former client, without the informed and written consent of the client or former client, relating to a matter in reference to which he has obtained confidential information by reason of or in the course of his employment by such client or former client.")

69. See Cal. Rule 5-102(B) (providing: "A member of the State Bar shall not represent conflicting interests, except with the written consent of all parties concerned.")

70. Elliot, 211 Cal. at 805.

71. "By signing the joint powers agreement McFarland waived its right to disqualify SLS from representing other signatories to that agreement based on a presumption from a substantial relationship between SLS's former representation and its current representation. It did not waive its right to disqualify SLS if SLS acquired in the former representation confidential information pertaining to the current representation. However, McFarland offered no substantial evidence that it had imparted confidential information to SLS on this case. Id. at 809.

72. Id. at 807.

73. Id. "Had McFarland truly conveyed confidential information to SLS pertaining to the Ell! suit, McFarland could have revealed the nature of the information disclosed or to what it relates, and the present appeal would likely have been averted. Instead, McFarland's attorneys, after being on the case for over six months (June 3, 1983, to Dec. 14, 1983), moved to disqualify SLS two days before their scheduled trial." Id. at 808.

74. 547 F. Supp. 178 (S.D.N.Y. 1982).

75. Id. at 180.

76. Id. at 180; see also id. at 183 ("Finley, Kumble's zeal in its pursuit of expanding its roster of clients brought it close to, although not quite beyond, the limits of permissible conduct.").

77. Id.

78. Id. The waiver letter was drafted by Finley, Kumble and agreed and accepted by a principal of Pyramid Utica.

79. Id.

80. Id. at 181.

81. Id.

82. Id.

83. Id. at 182.

84. Id.

85. Id.

86. Id. at 183.

87. Id. at 181.

88. No. 90 Civ. 1080 (JMC), 1990 U.S. Dist. LEXIS 15284 (S.D. Cal. Nov. 14, 1990) (Memorandum and Order).

89. Id. at 2-3 (citing Exhibit A-1, Affidavit of George Reath, Jr.).

90. Id. at 3-4 (quoting Exhibit A-2, correspondence from John M. Bailey, counsel for Fisons, regarding the conditions set by Pennwalt).

91. Id. at 14-15.

92. Id. at 15-16. ("Moreover, full disclosure of the dual representation was made to Fisons .... Here, Fisons was made aware of the possible adverse affects of dual representation when Dechert Price told Fisons that it would undertake to represent Fisons provided that Dechert Price be allowed to continue its representation.of Atochem. Such disclosure is adequate in view of the fact that Fisons is a knowledgeable and sophisticated client.").

93. Id at 16. ("Fisons, however, argues that disclosure was inadequate because it was not informed that the conflict of interest could arise in a suit charging Atochem's management with fraud. Fisons' contention is plainly without merit. Disciplinary Rule 5-105 does not require that the nature of the litigation which gives rise to the conflict be known prior to giving consent.").

94. 5 F. Supp. 2d. 1356 (N.D. Ga. 1998).

95. The consent was embodied in Alston & Bird's standard engagement letter, which read in part:

As we have discussed, because of the relatively large size of our firm and our representation of many other clients, it is possible that there may arise in the future a dispute between another client and WORLDSPAN, or a transaction in which WORLDSPAN's interests do not coincide with those of another client. In order to distinguish those instances in which WORLDSPAN consents to our representing such other clients from those instances in which such consent is not given, you have agreed, as a condition to our undertaking this engagement, that during the period of this engagement we will not be precluded from representing clients who may have interests adverse to WORLDSPAN so long as (1) such adverse matter is not substantially related to our work for WORLDSPAN, and (2) our representation of the other client does not involve the use, to the disadvantage of WORLDSPAN, of confidential information of WORLDSPAN we have obtained as a result of representing WORLDSPAN.

We have advised you that we have served as special counsel to Delta Air Lines for certain typespf matters, including state and local tax matters. We do not view our work for Delta to be in conflict with our representation of WORLDSPAN, and Delta.... has consented to our representation of WORLDSPAN, and Delta ... has consented to our representation of WORI-15SPAN. We have also advised you that we have represented American Airlines. We do not believe our representation of American Airlines is in conflict with our representation of WORLDSPAN. We have also represented various other airlines from time-to-time on limited matters .... We do not view our representation of any of these carriers to be in conflict with our proposed representation of WORLDSPAN.

If any of the foregoing is not consistent with your understanding of the terms of our engagement, I

would appreciate your advising me in writing as soon as possible so that we may resolve any misunderstanding. If you have any questions or wish to discuss any of these points, please give me a call.

Id. at 1359.

96. Although Alston & Bird had represented American Airlines, the Court treated Sabre as a new client for purposes of its analysis.

The record shows that American Airlines is a subsidiary of AMR Corporation (AMR). The Sabre Group are 80% owned by AMR. There was no suggestion that the Law Firm had ever represented AMR, or the Sabre Group, and no suggestion that it considered it had a standing obligation to represent any entity owned by or connected to either AMR or American Airlines, or, indeed, that it had the expectation of being so requested. The defendants here are simply new clients requesting representation by the law firm five years after the 'standard' letter of representation was sent.

Id. at 1360.

97. Id. at 1358-59. 98. Id. at 1359.

99. Id. (text of the Worldspan advance consent supra note 95). 100. Id. at 1358.

101. Id. This case could have been decided on narrower grounds, if the Court had held that the advance consent was not complied with because the litigation was substantially related to the prior representation and/or Alston & Bird was in a position to use confidential information of Worldspan to the disadvantage of Worldspan. See id. at 1359 (text of the advance consent, including these two limitations, supra note 95). Although Judge Moye did not find that Worldspan's tax matters and Sabre's suit against Worldspan were substantially related br that confidential information would be misused, he may have refused to enforce the advance consent in part because of doubts about whether these two conditions had been fully complied with. Judge Moye observed that the suit as well as the tax matters "all involve in different ways and to different degrees plaintiffs' computer airline reservations operation." Id. at 1356. In denying Alston & Bird's motion for rehearing of the disqualification motion, Judge Moye was even more explicit:

But the problem lies in whether that tax representation could provide defendants an advantage in the

instant contested tort litigation. It is simplistic to suggest that tax matters are such a tightly compartmentalized part of a business, or indeed of a large law firm's practice, that a court can assume it 'obvious' that there can be no relationship between such practice and the firm's other corporate or litigation practice.... A tax lawyer must, at least as a general proposition, be familiar with all aspects of a client's business to give sound advice on most tax problems. And, in the process of achieving such familiarity he must talk to his client's employees, ask them questions, see files, and the like. As the court noted in its earlier order, it assumed, and there has been no counter suggestion, that the subject matter of the state tax matters was property in or relating to, or income deriving from, plaintiffs' computers and their operation in plaintiffs' business. Those computers are likewise central to the litigation before this court.

Id. at 1362.

102. ABA Comm. On Ethics and Professional Responsibility, Formal Op. 93-372 (1993).

103. Id. ("Given the importance that the Model Rules place on the ability of the client to appreciate the significance of the waiver that is being sought, it would be unlikely that a prospective waiver that did not identify either the potential opposing party or at least a class of potentially conflicting clients would survive scrutiny. Even that information might not be enough if the nature of the likely matter and its potential effect on the client were not also appreciated by the client at the time the prospective waiver was sought.").

104. Id.

105. REsTATEmENT, supra note 36, 202 cmt. d (Proposed Final Draft 1996).

106. Draft Rules and Explanatory Memos for Public Comment, Proposed Rule 1.4 - Public Discussion Draft (March 23, 1999) http://www.abanet.org/cpr/e2k/draftrules.html [hereinafter Proposed Rule 1.41.

107. The Restatement defines "informed consent" in 202: "Informed consent requires that the client or former client have reasonably adequate information about the material risks of such representation to that client or former client." RESTATEMENT, supra note 36, 202.

108. See Proposed Rule 1.4 ("The Commission recommends that throughout the Rules, the phrase `consent after consultation' be replaced with `gives informed consent.' The Commission believes that 'consultation' is a term that is not well understood and does not sufficiently indicate the extent to which clients must be given adequate information and explanation in order to make reasonably informed decisions. The term `informed consent,' which is familiar from its use in other contexts, is more likely to convey to lawyers what is required under the Rules.").

109. See id. at cmt. 5 ("Many of the Model Rules require the lawyer to obtain the informed consent of a client or other person before accepting or continuing representation or pursuing a course of conduct. See, e.g., MODEL RuLES Rules 1.6-1.12. The communication necessary to obtain such consent will vary according to the rule involved and the circumstances giving rise to the need for disclosure. The lawyer must make reasonable efforts to assure that the client possesses information reasonably adequate to make an informed decision. Ordinarily, this will require communication that includes a disclosure of the facts and circumstances giving rise to the situation, any explanation reasonably necessary to inform the client of the material advantages and disadvantages of the proposed course of conduct, and a discussion of the client's options and alternatives. Il some circumstances it may be appropriate for a lawyer to advise a client to seek the advice of other counsel. A lawyer need not inform a client of facts or implications already known to the client; nevertheless, a lawyer who does not personally inform the client assumes the risk that the client is inadequately informed and the consent is invalid. In determining whether the information and explanation provided are reasonably adequate, relevant factors include whether the client is sophisticated in legal matters generally and in making decisions of the type involved and whether the client is independently represented by other counsel in giving the consent.")

110. Id.

111. Draft Rules and Explanatory Memos for Public Comment, Proposed Rule 1.7 - Public Discussion Draft (March 23, 1999) http://www.abanet.org/cpr/e2k/draftrules.html [hereinafter Proposed Rule 1.7].

112. ABA Formal Op. 93-372, supra note 102.

113. See supra text accompanying notes 48-101.

114. See supra text accompanying notes 105 and 109. 115. See supra text accompanying notes 11 and 16.

116. A good illustration of this approach is Hasco, Inc. v. Roche, 700 N.E.2d 768 (Ill. App. Ct. 1998) (appeal

from circuit court's injunction order disqualifying the law firm Schuyler, Roche & Zwirner from representing certain clients in an arbitration proceeding against another client before the National Association of Securities Dealers, Inc.). In Roche, the Illinois Appellate Court did not refuse to enforce an advance waiver in the lawyer's retention letter, but narrowly construed the waiver, which had mentioned specific future conflicts that were waived but had not mentioned the conflict at issue.

As a final matter, we agree with the circuit court's determination that the waiver signed by Hasco, Inc., as contained in the retention letter, constituted a limited waiver regarding conflicts arising from [the law firm's] representation of the subordinated lenders in the West Virginia lawsuit .... Although Roche testified that the purpose of the waiver `was to waive all future conflicts of any nature, the circuit court correctly found that such a broad intention was not contained in the language of the waiver.

Hasco, Inc. v. Roche, 700 N.E.2d 768, 776 (1998).

117. See supra text accompanying notes 94-101 (discussing Worldspan v. Sabre). 118. ABA Comm. On Ethics and Professional Responsibility, Formal Op. 95-390 (1995). -.

119. See Lara E. Romansic, Stand by Your Client?.' Opinion 95-390 and Conflicts of Interest in Corporate Families, 11 GEo. J. LEGAL ETmcs 307 (1998); Ronald D. Rotunda, Conflicts Problems When Representing Members of Corporate Families, 72 NoTRE DAME L. REV. 655 (1997).

120. See ABA Formal Op. 95-390, supra note 118 (Amster, dissenting) ("if there is one clear message to be drawn from the Majority opinion, it is that all corporate in-house counsel and all corporate officers having responsibility for their company's relationship with their attorneys, should promptly review their retainer agreements and amend them in order to protect their `corporate affiliates' from their own lawyers"). See also Romansic, supra note 119 at 311 (quoting this dissent and discussing renegotiation of this issue in retainer agreements).

121. See Romansic, supra note 119, at 311 (observing that "[s]ome law firms, however, have protected themselves from possible conflicts and lost business by adding a provision in their engagement lettrs specifying that the lawyer represents the corporation, not the corporation's affiliates or subsidiaries.").

122. ABA Formal Op. 95-390, supra note 118. 1 123. Id.

124. There will almost certainly be a conflict if the lawyer previously represented the joint venture as a whole in a matter substantially related to the break up. See MODEL RuLEs Rule 1.9. There will also be a conflict if the lawyer is currently representing the joint venture even in an unrelated matter. See MODEL RuLEs Rule 1.7.

125. For general discussion of the problems that arise in close corporation representations, see Lawrence E. Mitchell, Professional Responsibility and the Close Corporation: Toward a Realistic Ethic, 74 CORNELL L. REv. 466, 466-69 (1989).

126. The majority shareholders of a close corporation, for example, should not be permitted to covertly enter into a retainer agreement naming themselves as the sole client of a lawyer who has undertaken legal work that appears to be for the benefit of the corporation as a whole.

127. See MODEL CODE DR 5-105(A) (a lawyer "shall decline preferred employment if the exercise of his independent professional judgment on behalf of a client will be or is likely to be adversely affected by thi:acceptance of the proffered employment, or if it would be likely to involve him in representing differing, interests, except to the extent permitted under DR 5-105(C)") and DR 5-105(C) ("[A] lawyer may represent multiple clients if it is obvious that he can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each.").

128. See 1908 CANONS OF PROFESSIONAL ETHics, Canon 6 (1908) (a conflicting interest exists "when in behalf of one client, it is [the lawyer's] duty to contend for that which duty to another client requires him to oppose".). Canon 6 provided that "[It] is unprofessional to represent conflicting interests, except by express consent of all concerned given after full disclosure of the facts." Id.

129. See, eg., IBM v. Levin, 579 F.2d 271, 280 (3d Cir. 1978).

130. The adversity question in such cases may turn on whether the two transactions are deemed to be related. See In re Ainsworth, 614 P.2d 1127, 1132 (Or. 1980) (no conflict of interest when a lawyer represented parties with adverse interests in two unrelated real-estate matters and when it was not likely that the "independent professional judgment" of the lawyer on behalf of either client would be adversely affected).

131. See MODEL RuLEs Rule 1.7, cmt. [91 ("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."). Although the comments to Model Rule 1.9 (former client conflicts) do not specifically address such positional conflicts of interest, they can arise in the former client context as well. For example, an impermissible conflict might arise if another lawyer takes over the appeal of a case that the lawyer won for a client at trial, while the lawyer argues an inconsistent position on behalf of another client to the same appellate court. See generally John S. Dzienkowski, Positional Conflicts of Interest, 71 TEx. L. REv. 457 (1993).

132. The general rule in conflicts jurisprudence is that economic competition does not itself create an adverse interest, although economic competition between two clients may be a factor in evaluating other evidence of adversity. Although a blanket agreement not to represent a client's competitors might be an improper restriction

on the lawyer's practice, see Model Rule 5.6, a lawyer and client could agree to apply more stringent conflicts rules to representation of competitors than to representation of noncompetitors.

133. This issue is of particular concern if a law firm continually represents an investment bank, commercial bank, or institutional investor that on repeated occasions provides financing or underwriting services. Because such institutions usually distribute their work among several law firms, the law firm sometimes will not represent the institution in a transaction, but instead will be asked to represent a borrower or issuer with interests that are in some ways adverse to the institution. The law firm should be permitted to obtain from the institutional client an ex-ante agreement that the lawyer's representation of a future borrower or issuer is not adverse, and then obtain a similar agreement from the borrower or issuer client at the time of the transaction.

134. For example, a client could agree that the lawyer is free to attack certain legal arguments she makes on behalf of that client in another concurrent or subsequent representation. Alternatively, a lawyer and client could more narrowly agree that inconsistent legal arguments made on behalf of a second client will not create positional conflicts unless made before the same tribunal or an appellate tribunal in the same jurisdiction.

135. Edward Bernstein has defined an "attitudinal negotiation cost" as "a decrease in value or increase in cost that results from an attitudinal change that either causes a party to revise his expectation of the probability of performance or the assertion of invalid claims, or that in fact affects one of these probabilities." Edward A. Bernstein, Law & Economics and the Structure of Value Adding Contracts: A Contract Lawyer s View of the Law & Economics Literature, 74 OR. L. REv. 189, 229 (1995). For example, "[w]hen a couple chooses-not to enter into such [a prenuptial] agreement it is often because the attitudinal negotiation cost exceeds the benefit of doing so." Id. at 231.

136. See Charles W. Wolfram, Former Client Conflicts, 10 GEO. J. LEGAL ETHics 677, 681 and 727-28 (1997) [hereinafter Wolfram, Former Client Conflicts] (favoring a "factual-reconstruction test" for applying the substantial relationship standard).

137. The "substantially related matter" language in Model Rule 1.9 is derived from the "substantial relationship" test applied in T.C. Theatre Corp. V. Warner Bros. Pictures, 113 F. Supp. 265, 268 (S.D.N.Y. 1953) (requiring successive representations to be substantially related for the attorney to be disqualified).

138. See MODEL CODE Canon 9 ("A lawyer should avoid even the appearance of impropriety").

139. See, e.g., General Motors Corporation v. City of New York, 501 F.2d 639 (2nd Cir. 1974) (Irving Kaufman, J.) (applying the "appearance of impropriety" standard to disqualify a former government lawyer who substantially participated in bringing an antitrust suit by the Justice Department from representing a private plaintiff in a similar antitrust suit against the same defendant).

140. See Wolfram, Former Client Conflicts, supra note 136, at 686 (discussing the fortunate demise of the appearance of impropriety standard in conflicts jurisprudence).

141. Id. at 681. "That process has two steps: (1) First, one must assess the likelihood that, given the 'matter' on which the lawyer worked for the former client, the lawyer would likely have been exposed to confidential client information relevant to that matter. (2) Second, with the results of the first determination in hand, one then assesses the likelihood that significant portions of the confidential information thus gained will be relevant in the later representation." Id. at 717.

142. Although the test "requires a fact-specific inquiry," that inquiry should be "conducted at a level of abstraction sufficient to protect against improper exposure of a former client's confidential information iq the course of attempting to determine whether to protect it." Id. at 681. :1

143. See MODEL RULEs Rule 1.9, cmt. [11 ("Thus, a lawyer could not properly seek to rescind on behalf of a new client a contract drafted on behalf of the former client."). See generally Wolfram, Former Client Conflicts, supra note 136, at 696-702 (discussing circumstances in which an "attack-own-work prohibition" would apply).

144. Wolfram, Former Client Conflicts, supra note 136, at 697. Although the attack-own-work prohibition is analytically distinct from other situations to which the substantial relationship test is met, see id. at 685, the two are treated together in the ALI Restatement. See REsTATEMENT, 213 ("The current matter is substantially related to the earlier matter if: (1) the current matter involves the work the lawyer performed for the former client; or (2) there is a substantial risk that representation of the present client will involve the use of information

acquired in the course of representing the former client, unless that information has become generally known.").

145. Does, for example, a lawyer's cursory review of a contract or a securities filing for a client, make the entire document fall within the definition of work performed for the former client?

146. See Wolfram, Former Client Conflicts, supra note 136, at 701, n. 98, citing West Virginia Canine College v. Rexroad, 444 S.E.2d 566 (W. Va. 1994) (disqualification motion denied where lawyers had done a title examination on property for purchasers and now sought to attack the purchaser's claim on oil and gas leaseholds `on adjoining property that the same purchasers claimed to have acquired in a subsequent transaction).

147. Id. at 723 (noting the potentially sweeping reach of "playbook" claims).

148. Id. at 724, quoting with approval RESTATEmENT, 213, cmt. d(iii) ("only when such information will be directly in issue or of unusual value in the subsequent matter will it be independently relevant in assessing a substantial relationship.").

149. Id. at 723, citing Adam v. MacDonald Page & Co., 644 A.2d 461, 464 (Me. 1994) (finding a conflict where the lawyer was exposed to "information concerning a client's ability to deal with the stress of litigation, or serious financial difficulties that could affect the client's ability to litigate.").

150. "[T]he substantial relationship standard aims to protect confidentiality, but... confidentiality does not exhaust the relevant concerns informing the standard and former-client conflicts law generally." Id. at 680. The principal concern, besides confidentiality, is loyalty to clients. Professor Wolfram observes that loyalty considerations should only have a separate role in cases where a lawyer attacks his own work or improperly resigns from a representation in order to take advantage of more liberal former client conflict rules (see discussion of "hot potato" cases in text accompanying note 163 infra.). Professor Wolfram acknowledges, however, that some courts and commentators assign a broader role to loyalty considerations. Id. Because loyalty is a vague concept subject to unpredictable ex-post judicial determination of what type of adverse representation is disloyal, lawyers and clients might prefer to limit the relevant considerations to confidentiality.

151. For example, a lawyer who works on a common stock offering for a client might agree that the offering is "substantially related" to any offering of common or preferred stock by the client for a period of two years, and any offering by the same client of debt securities for a period of one year, but that all other securities offerings by the client shall not be substantially related. This arrangement would preclude the lawyer from subsequently representing a party with an interest adverse to the client (perhaps an investor suing under the securities laws for inadequate disclosure) when the subsequent representation concerns a securities offering similar enough to the first (particularly with respect to the disclosure documents used) that confidential information could be used against the client issuer.

152. For example, the lawyer and client might agree that hostile takeover bids commenced by the client against other companies are not substantially related to a bid in which the firm represented the client as hostile bidder. Such a waiver was obtained by Skadden, Arps in Kennecott Copper Corporation and is particularly important if a law firm wants to preserve its right to represent any of its current clients against a future bid by the another client.

153. This alternative could be used in circumstances where the client is unwilling to remove the subsidiary from the definition of "client" altogether. See supra text accompanying notes 118-26.

154. For example, a lawyer who agrees to prepare a form of underwriting agreement for an investment bank, might ask for, and receive in her retention agreement, the right to subsequently represent an issuer in negotiating changes to the same underwriting agreement or even in suing the investment bank for breach of the agreenjent. Such an arrangement might be particularly desirable in circumstances where, even though one law firm d*fts the form agreement, different law firms may be asked to represent the underwriter in specific transactions. The law firm that drafted the form agreement presumably would not want to be precluded from representing tthe issuer in any of these subsequent transactions.

155. For example, the retainer agreement could state that general knowledge about the client's litigation or negotiation strategy, financial condition, or business practices shall not alone be sufficient to prevent the lawyer from representing a subsequent client in any other matter.

156. A very broad expansion of the definition of "substantially related matter," such as one that would bar the lawyer from doing any work whatsoever for a competitor of the client, might be invalid under Model Rule 5.6, which prohibits contractual restrictions on practice.

157. Compare MODEL Rut.ts Rule 1.7 and MODEL RULEs Rule 1.9. 158. See supra text accompanying notes 74-87 and supra notes 88-93. 159. See supra text accompanying notes 94-101.

160. See Wolfram, Former-Client Conflicts, supra note 136, at 703-06 (discussing ambiguity surrounding "sunset concepts"). 161. See id. at 704-O5.

162. The principal difference is that the substantial relationship standard is an element of former client conflicts, but not for conflicts between current clients.

163. "A firm may not drop a client like a hot potato, especially if it is in order to keep happy a far more lucrative client." Picker International, Inc. v. Varian Assocs., Inc., 670 F. Supp. 1363, 1365. See generally, Wolfram, Former Client Conflicts, supra note 136, at 708-09 (discussing the prohibition on "hot potato" lawyering).

164. See RESTATEMENT supra note 36, 213 cmt. c ("Withdrawal is effective to render a representation 'former' for the purposes of this Section if it occurs at a point that the client and lawyer contemplated as the end of the representation.").

165. The client's right to fire the lawyer is an immutable rule. See MoDEL RULES Rule 1.16(a)(3) (providing that a lawyer shall withdraw from a representation if the lawyer is discharged).

166. Lawyers may also carefully scrutinize the prior work of any lawyers they admit into their fi*ns.-See MODEL RULES Rule 1.10 (imputed disqualification rule disqualifying the entire firm when one of its lawyers would have been disqualified under Model Rule 1.9)

167. This problem is analytically distinct from the problem in which it is uncertain who the lawyer's client is. See text accompanying notes 118-26, supra. Here, the lawyer is asked by the first client, and agrees, to represent a group of persons whose interests are presently aligned.

168. See Wolfram, Former Client Conflicts, supra note 136, at 709-12 (discussing conflict prohibitions in co-client cases).

169. See supra text accompanying notes 66-73. 170. MoDEL RuLEs Rule 1.10.

171. Compare MODEL RuLEs Rule 1.10 (Imputed Disqualification: General Rule) (no allowance for screening) with MODEL Rtn.Es Rule 1.11 (Successive Government and Private Employment) (permitting the lawyer's firm to participate in the matter if the disqualified lawyer is properly screened and receives no portion of the fee from the matter and the appropriate government agency is given written notice to allow it to ascertain compliance with the rule).

172. See, eg., Westinghouse Elec. Corp v. Kerr-McGee Corp., 580 F.2d 1311, 1321 (7th Cir. 1978) (screening could not be used to avoid firm disqualification in a concurrent conflict).

173. See, e.g., Cromley v. Board of Education, 17 F.3d 1059 (7th Cir. 1994). See generally, Christopher J. Dunnigan, Conflict of Interest: The Art Formerly Known as the Chinese Wall: Screening in Law Firms: Why, When, Where, and How, 11 GEo. J. LEGAL ETHics 291 (1998).

174. The Ethics 2000 Commission is considering proposals to allow screening of conflicts between private sector clients.

175. Compare MODEL RuLEs Rule 1.9 (Conflict of Interest: Former Client) with MODEL RULEs Rule 1.11 (Successive Government and Private Employment). See also supra text accompanying note 24 (discussing the tailored default rules that apply to former government lawyers).

176. See MODEL RuLES Rule 1.11 ("Except as law may other wise expressly permit, a lawyer shall not represent a private client in connection with a matter in which the lawyer participated personally and substantially as a public officer or employee, unless the appropriate government agency consents after consultation.").

177. See General Motors Corporation v. City of New York, 501 F.2d 639 (2d Cr. 1974) (J. Irving Kaufman, J.) (former Justice Department lawyer who had represented the United States in an antitrust suit against General Motors for monopolizing the market for city buses disqualified from bringing a substantially similar suit against General Motors on behalf of the City of New York).

178. A few states prohibit a government agency from giving consent to an adverse representation. See, e.g., New Jersey Rules of Professional Conduct, Rule 1.7(a)(2) (providing that "a public entity cannot consent to any such representation"). This prohibition on consent, however, presumably does not extend to congruent interest representations.

179. See MODEL RuLEs Rule 1.9. Model Rule 1.11 also would still apply to adverse interest reprisentations, even if the provisions of the Rule were waived with respect to congruent interest representations. '

180. MoDEL RuLEs Rule 1.11, cmt. 1. This is one of the principal justifications for the proibition on congruent interest representations.

181. In addition, government agencies might want to define ex-ante what constitutes a "matter" in which a government lawyer "participated personally and substantially," so government lawyers can identify ahead of time the matters from which they will be precluded in private practice. Model Rule 1.11 already allows a government agency to provide a more precise definition of the term "matter" in its conflict of interest rules, see Model Rule 1.11(d)(2), but does not specifically provide for ex-ante determination of who "participated personally and substantially" in a matter and who did not. Many government conflict of interest policies, however, address both of these issues.

182. See Richard W. Painter, Proposal to Amend the Model Rules to Provide for Advance Consent to Conflicts (submitted to the ABA Ethics 2000 Commission) [hereinafter Painter, Conflicts Proposal].

183. See, e.g., the agreement among co-clients in McFarland Unified School District, supra note text accompanying note 67.

184. See supra text accompanying note 49. 185. See supra text accompanying notes 90-91.

186. Cf. Worldspan L.P., et al. v. The Sabre Group Holdings, Inc., 5 F. Supp. 2d 1356 (N.D. Ga. 1998). 187. Id.

188. See REsTATEmENT supra note 36, 202, cmt. d, (quoted in supra note 105).

189. See supra text accompanying note 79.

190. Identification of relevant documents should not be too difficult as most law firms assign a matter name or number to documents stored on disks and hard drives as well as to hard copies of documents stored in!the firm's physical files. Absent a specific showing that an agreed upon prophylactic provision was violated bythe firm (for example, not all relevant documents were placed in the designated restricted-access files), courts should be reluctant to entertain claims that confidential information was misused.

191. Although a firm might not agree to part with files that could be needed in the event of a malpractice suit, the firm might agree to an arrangement whereby the files and computer disks were stored in sealed containers that would not be opened except in the event of a controversy with the first client or a request by that client to reopen the matter. The advantage of the contractual approach contemplated by this proposal is that the lawyer and client can work out solutions to these problems for themselves.

RICHARD W. PAINTER*

* Professor of Law, University of Illinois. The author thanks Chuck Wolfram, Roger Cramton, and Tom Morgan for helpful comments on prior drafts of this article.

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