Can one firm represent a creditor pursuing a debtor's property and also a buyer trying to purchase that same property?

Plain-English summary

A firm represented Client 1 in a collection claim against a debtor, intending, once it obtained a judgment, to satisfy it against property held by the debtor or his family, and to pursue a fraudulent-transfer claim if the property had been moved. While that representation was ongoing, the firm was asked to represent Client 2 in buying that same property from the debtor or his family.

The Committee applies Rule 1.7(b), under which a lawyer may not represent a client if the representation may be materially limited by responsibilities to another client, unless the lawyer reasonably believes the representation will not be adversely affected and the client consents after disclosure. It finds the two clients' interests directly opposed: Client 1 benefits from the property staying put (and at a high value) so it can be reached for the judgment, while Client 2 wants to acquire it cheaply and free of Client 1's potential claims. Selling the property could defeat Client 1's ability to collect.

The Committee concludes the conflict is not waivable, because the firm could not reasonably believe that representing both clients would not adversely affect one of them. It surveys its prior opinions recognizing that waivability is fact-specific, but reasons that here, by the time it becomes clear whether a judgment will issue, it would be too late to undo the harm to Client 1 if the property has been sold to Client 2. A sale might occur without the firm, but if the firm involves itself in effecting that sale, no reasonable belief in non-adverse representation could exist.

Currency note

This opinion was issued in 2004, before Illinois adopted its current Rules of Professional Conduct effective January 1, 2010. The Illinois Rules cited here use the pre-2010 numbering. Subsequent rule amendments or later opinions may have changed the analysis. Verify against current rules before relying on any specific rule cited here.

In practice

Under the Illinois rule as it stood at the time, the opinion holds that simultaneous representation of a creditor pursuing property and a buyer of that property is a Rule 1.7(b) conflict that cannot be cured by client consent, because the lawyer could not reasonably believe the dual representation would leave both clients unharmed. The Committee identifies the irreversibility of the harm (the property being sold before the judgment question is resolved) as the factor that makes the conflict non-waivable here, while reaffirming that waivability generally turns on the specific facts.

Common questions

Q: Is it a conflict for one firm to represent both a creditor and a buyer of the debtor's property?

A: Yes. The opinion concludes the two clients have directly antagonistic interests in the same property, creating a Rule 1.7(b) conflict.

Q: Can the clients waive the conflict by consenting?

A: No. The opinion concludes the conflict is not waivable because the firm could not reasonably believe that representing both clients would not adversely affect one of them.

Q: Why can't the lawyer just rely on the chance that no judgment issues?

A: The opinion reasons that by the time it is known whether a judgment will issue, it would be too late to undo the harm to the creditor client if the property has already been sold to the buyer client.

Background and rules framework

The opinion interprets Illinois Rule 1.7(b) (a lawyer shall not represent a client where the representation may be materially limited by duties to another client, absent a reasonable belief of no adverse effect and client consent, corresponding to Model Rule 1.7). The analysis turns on whether the lawyer could reasonably believe the dual representation would not adversely affect either client.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.7 / Illinois Rule 1.7(b) (concurrent conflicts; material limitation)

Other opinions cited:

• ISBA Advisory Opinions 86-15, 90-30, 90-31, 99-1, 644 (fact-specific assessment of waivability)

See also

• NYC Bar Op. 2005-05: Unforeseeable Concurrent Client Conflicts
• ISBA Ethics Op. 05-01: Former Client Testifying Against a Current Client

Source

• Landing page: https://www.isba.org/ethics/opinions/0401