Can a lawyer who is helping a husband prepare for divorce also represent both spouses in a short sale of their home?

Plain-English summary

A lawyer represents a husband who is gathering information for a possible divorce but has not yet filed. The couple owes about $100,000 on a home now worth less, can no longer afford the payments, and could avoid a deficiency judgment through a short sale if they act within six months. The lawyer asks whether she may represent both spouses in the short sale and whether they can waive any conflict.

The opinion concludes the short-sale representation is a concurrent conflict. Citing ABA Formal Opinion 05-434, it reasons that direct adversity exists even without overt confrontation, so the lawyer's representation of the husband on the contemplated divorce is already directly adverse to the wife, and taking her on in the short sale creates a Rule 1.7(a)(1) conflict. The opinion adds that a 1.7(a)(2) material-limitation conflict may also exist: if the short sale could give one spouse leverage in the divorce, or if it falls through, the lawyer's duties to the husband could materially limit her representation, and given how closely home ownership and finances bear on a divorce, it is hard to imagine the short-sale representation would not be materially limited.

The opinion then walks through the Rule 1.7(b) exception. The first subpart (reasonable belief of competent, diligent representation of each client) is the hard one: given the inherent conflict in divorce, the committee says it seems unlikely a lawyer could ever represent one spouse in a contemplated divorce and concurrently represent the other for any purpose (citing ISBA Opinions 99-01 and 86-15). The other subparts can be met (not prohibited by law; no claim before a tribunal; informed consent), but informed consent under Rule 1.0(e) requires disclosing to the wife that the husband is contemplating divorce and that the short sale could affect its outcome, and the lawyer should recommend separate counsel or a different unconflicted lawyer. Rule 1.6 is implicated twice: the husband must consent to revealing that he retained the lawyer about a divorce, and both spouses must consent to sharing the financial information the short sale requires. The opinion concludes the lawyer will likely want to decline the joint representation.

In practice

Under this opinion, a lawyer in this position usually should not take on both spouses in the short sale; the opinion holds the representation is directly adverse to the wife under Rule 1.7(a)(1) and, given the way a short sale interacts with a divorce, will rarely satisfy the Rule 1.7(b)(1) requirement that the lawyer reasonably believe she can competently and diligently represent each client. If the lawyer does conclude she can proceed, the opinion holds she must first obtain the husband's informed consent to disclose the contemplated divorce to the wife, then the wife's informed consent after explaining the material risks (including how the short sale could affect the divorce), and must address the Rule 1.6 confidentiality of each spouse's financial information. The opinion suggests recommending separate counsel or a different unconflicted lawyer for the short sale.

Common questions

Q: Is representing both spouses in a short sale a conflict if I'm preparing one spouse's divorce?

A: Yes. The opinion concludes the divorce representation is already directly adverse to the wife, so taking her on in the short sale creates a Rule 1.7(a)(1) concurrent conflict.

Q: Can the spouses just waive the conflict?

A: Only in a rare case. The opinion holds it will be unusual for the lawyer to reasonably believe she can competently represent both under Rule 1.7(b)(1), and any consent must follow full disclosure of how the short sale could affect the divorce.

Q: What confidentiality issues arise?

A: The opinion identifies two: the husband must consent to revealing he is contemplating divorce, and both spouses must consent to sharing the financial information the short sale requires, understanding it could affect the divorce.

Background and rules framework

The opinion interprets Illinois Rule of Professional Conduct 1.7 (concurrent conflicts under 1.7(a)(1) and (a)(2) and the 1.7(b) exception), Rule 1.6 (confidentiality), and Rule 1.0(e) (informed consent). These correspond to Model Rules 1.7, 1.6, and 1.0.

Citations and references

Rules:

• Illinois RPC 1.7(a), (b) (MR 1.7): concurrent conflicts and the consent exception
• Illinois RPC 1.6 (MR 1.6): confidentiality of information
• Illinois RPC 1.0(e) (MR 1.0): informed consent

Other opinions cited:

• ABA Formal Opinion 05-434: direct adversity without overt confrontation
• ISBA Ethics Opinions 86-15 and 99-01: representing spouses in family-law matters
• Restatement (Third) of the Law Governing Lawyers Section 122: informed consent to conflict waivers

See also

• ISBA Ethics Op. 17-04: Representing Both Buyer and Seller in a Real Estate Transaction
• ISBA Ethics Op. 13-02: Representing Business Partners and Later Acting Adverse to One
• NY State Bar Op. 807: Imputation and Dual Representation of Buyer and Seller

Source

• Landing page: https://www.isba.org/ethics/opinions/1703