In Colorado, when may one lawyer represent both sides of a deal, such as buyer and seller or a husband and wife?

Plain-English summary

The Committee addressed four recurring multiple-representation situations: both spouses negotiating a property settlement before a dissolution is filed; both buyer and seller in a residential real estate transaction; both buyer and seller in the sale of a business; and individuals or an entity in the formation of a business entity. The opinion applies Colo. RPC 1.7's three-step framework: first identify whether a concurrent conflict exists (direct adversity or a significant risk of material limitation); second decide whether the conflict is consentable; and third determine what must be communicated to obtain informed consent confirmed in writing.

The opinion declines to adopt a per se rule against representing opposing parties in a transaction, but cautions that the lawyer "should proceed very cautiously" and must first determine that the lawyer can adequately represent each party. For the residential real estate scenario, the opinion concludes joint representation is permissible only where the parties have already agreed on the essential terms and give informed written consent, and notes it "will be difficult to comply with those standards except, perhaps, in a case where both parties are knowledgeable and sophisticated." For the sale of a business, the opinion concludes that "only in the rarest of circumstances" could a lawyer adequately represent both buyer and seller.

On the dissolution scenario, the opinion states that representing both spouses in a pending (filed) dissolution proceeding is not permissible under Colo. RPC 1.7(b)(3), and that because a dissolution cannot conclude without court approval of the separation agreement, the prohibition may reach joint representation even before filing. On entity formation, the opinion explains that under Colo. RPC 1.13 the lawyer must be clear about who the client is, and a lawyer may choose to represent some or all of the members, the entity alone, or the entity plus members, but only after performing the conflicts analysis. Throughout, the opinion stresses that a lawyer in a multiple representation may not act as a mere "scrivener."

In practice

The opinion holds that, under the Colorado rule as it stood at the time, a lawyer may undertake multiple representation in a transaction only after reasonably concluding the lawyer can provide competent and diligent representation to each client and obtaining each client's informed consent confirmed in writing under Colo. RPC 1.7(b). Per the opinion, joint representation of both spouses in a filed dissolution is impermissible, joint representation of a business buyer and seller is proper only in the rarest circumstances, and a lawyer in any joint representation must disclose that the attorney-client privilege does not apply between commonly represented clients and that the lawyer may have to withdraw from representing both if a material dispute develops.

Common questions

Q: Can a Colorado lawyer represent both the buyer and the seller in a home sale?

A: Per the opinion, yes, but only if the parties have already agreed on the essential terms, the lawyer reasonably believes both interests can be adequately protected, and each gives informed consent in writing; the opinion notes this is difficult outside cases where both parties are sophisticated.

Q: Can one lawyer represent both spouses in a divorce?

A: The opinion concludes that representing both spouses in a filed dissolution proceeding is not permissible under Colo. RPC 1.7(b)(3), and the prohibition may extend to the period before filing because the settlement must ultimately be approved by a court.

Q: What must the lawyer disclose to get valid informed consent to a joint representation?

A: The opinion lists disclosing the facts giving rise to the conflict, the advantages and disadvantages of the joint representation, that the attorney-client privilege does not attach between the jointly represented clients, that information will be shared, and that the lawyer may have to withdraw (raising both clients' costs) if a dispute arises.

Background and rules framework

The opinion interprets Colorado RPC 1.7 (concurrent conflicts of interest), the analogue of Model Rule 1.7, along with Colo. RPC 1.13 (organization as client) for the entity-formation scenario and Colo. RPC 1.8(h) (limiting malpractice liability) and 4.3 (dealing with unrepresented persons). It draws on the Restatement (Third) of the Law Governing Lawyers and cites Colorado disciplinary decisions, including People v. Quiat, 979 P.2d 1029 (Colo. 1999), for the proposition that even a written conflicts disclosure can be insufficient if it fails to detail the conflicts and the waiver of privilege.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.7 (conflicts of interest: current clients)
• Colorado RPC 1.7, 1.13, 1.8(h), 4.3, and 1.0(e) (informed consent)

Cases:

• People v. Quiat, 979 P.2d 1029 (Colo. 1999), inadequate conflicts disclosure
• People v. Underhill, 683 P.2d 349 (Colo. 1984), representing buyers and sellers without disclosure

See also

• NY State Bar Op. 952: representing both lender and buyer when the lender pays the buyer's fees
• ABA Formal Op. 497: conflicts involving materially adverse interests
• NJ ACPE Op. 749: per se conflict from concurrent municipal and consortium representation

Source

• Landing page: https://www.cobar.org/ethicsopinions
• Original PDF: https://www.cobar.org/Portals/COBAR/repository/ethicsOpinions/FormalEthicsOpinion_68_2011.pdf