Can a lawyer who represents a bank in a vendor financing program also represent the equipment vendor in that program?

Plain-English summary

A lawyer represented a bank in an equipment vendor financing program, in which a supplier provides lease financing to its customers and then sells the leases to the bank. The supplier, whose in-house staff is inexperienced at the lease negotiation and drafting, asked the lawyer to take on three tasks: negotiating and drafting new leases with the supplier's customers, organizing the supplier's documentation process and training its staff, and representing the supplier in transactions outside the bank program. The lawyer expects to wind down his work for the bank on the supplier's program while continuing to represent the bank on unrelated matters, and asks whether this creates conflicts. The committee notes the analysis is the same whether the bank stays a current client on unrelated matters or becomes a former client on the program.

Applying Rule 1.7 (concurrent conflicts), Rule 1.0(f) ("differing interests"), and Rule 1.9 (former clients), the committee holds the first two tasks involve differing interests, because in negotiating the lease the supplier wants primarily to close the deal while the bank wants the customer to meet its credit standards. Those divergent goals trigger Rule 1.7(a) (and Rule 1.9(a) if the bank is a former client on the substantially related program work). But the committee holds the conflict is not necessarily non-consentable: if the lawyer reasonably believes he can provide competent and diligent representation to each client (not pulling his punches for the supplier to favor the bank, nor going easy on unrelated bank matters) and both clients give informed written consent, he may take on the negotiation, drafting, and training work. The third task, representing the supplier in non-bank transactions, raises no special conflict beyond that analysis, though the extent of the supplier representation may be material to any future bank consent.

In practice

Under the New York rule as it stood at the time of the opinion, a lawyer may represent both the bank and the vendor in a financing program despite their differing interests on the lease terms, provided he reasonably believes he can competently and diligently represent each and both give informed written consent under Rule 1.7(b) (or Rule 1.9 where the bank is a former client). The opinion treats the differing-interests determination as case-specific: here the divergence over credit terms is enough to trigger Rule 1.7(a), but not enough to make the conflict non-consentable. Representing the vendor in matters unrelated to the bank raises no separate conflict.

Common questions

Q: Do the bank and the equipment vendor have a conflict?

A: Yes, on the lease work. The opinion concludes their interests differ under Rule 1.7(a) and Rule 1.0(f), because the vendor wants to close the deal while the bank wants its credit standards satisfied.

Q: Can the lawyer represent both anyway?

A: Yes, with consent. The opinion holds the conflict is consentable: the lawyer may proceed if he reasonably believes he can competently represent each client and both give informed consent confirmed in writing.

Q: Does it matter whether the bank stays a client or becomes a former client?

A: No, the analysis is the same. The opinion holds that whether the bank remains a current client (Rule 1.7) or becomes a former client on the program (Rule 1.9), the differing interests and the cure by informed written consent are the same.

Background and rules framework

The opinion applies Rule 1.7 (concurrent conflicts and the Rule 1.7(b) consentability test), the "differing interests" definition in Rule 1.0(f), and Rule 1.9 (former clients in a substantially related matter). These correspond to Model Rules 1.7 and 1.9. It cites Rule 1.7 comment [7] on transactional conflicts and N.Y. City 2001-2.

Citations and references

Rules of Professional Conduct:

• New York Rule 1.7 (concurrent conflicts; consentability under 1.7(b)); Model Rule 1.7
• New York Rule 1.9 (former clients, substantially related matters); Model Rule 1.9
• New York Rule 1.0(f) (definition of "differing interests")

Other opinions cited:

• N.Y. City 2001-2: representing a client adverse to a current client in a separate matter, with consent

See also

• NY State Bar Op. 867: Simultaneous representation of lender and seller
• NY State Bar Op. 868: Concurrent representation of a corporation and its sole owner
• NY State Bar Op. 871: Conflicts of interest with former clients

Source

• Landing page: https://nysba.org/ethics-opinion-849/