Can a law firm represent two directly adverse clients in the same transaction by screening separate teams of lawyers and getting both clients' written consent?

Plain-English summary

A firm proposed to represent two long-term, sophisticated clients (each with in-house counsel) on opposite sides of negotiating and documenting a transaction, using two separately assigned teams with a consensual ethical screen. The screen would bar each team from working for the other client, reviewing the other's information, or communicating about the matter, and the firm would agree not to represent either client in any resulting litigation or arbitration. The Board concluded the proposed representation is not permissible.

The opinion concludes that representing two clients on opposite sides of the same transaction creates both a direct adversity conflict under Prof.Cond.R. 1.7(a)(1) and a material limitation conflict under Prof.Cond.R. 1.7(a)(2). It identifies interests that could materially limit each team, such as loyalty to one or both clients, the desire to maintain working relationships within the firm, the difficulty of balancing the teams' competence and experience, and the goal of retaining both clients even if negotiations turn adversarial.

On imputation, the opinion explains that under Prof.Cond.R. 1.10(a) the firm is treated as one lawyer, so a conflict held by one lawyer is imputed to all. Screening, defined in Prof.Cond.R. 1.0, is meant to wall off a single disqualified lawyer from confidential information; it is not recognized as a way to organize two firm teams to contend against each other for two firm clients. The opinion concludes the Rules do not authorize the combination of screening and consent proposed here, because even one lawyer could not competently and diligently represent both sides of a negotiated transaction, and the same problems arise for separate teams in a firm due to imputation. The opinion notes other jurisdictions (New York, Illinois, Rhode Island) have reached similar conclusions.

In practice

Under this opinion, a firm cannot solve a same-transaction adversity problem by building an internal "deal screen" between two lawyer teams, even with sophisticated clients' informed written consent. The opinion holds that the conflict is both direct adversity and material limitation, and that Prof.Cond.R. 1.10(a) imputes it across the firm. Per the opinion, screening under Prof.Cond.R. 1.0 addresses a single disqualified lawyer's access to confidential information, not the structuring of opposing teams within one firm, so the firm's proposed combination of screening and consent is not an authorized method to ameliorate the conflict and the representation is impermissible.

Common questions

Q: Can a firm put up an ethical screen between two teams to represent both sides of a deal?

A: No. The opinion concludes screening is designed to isolate a single disqualified lawyer from confidential information, not to let two firm teams oppose each other for two clients, and the Rules do not recognize that use.

Q: Does it help that both clients are sophisticated and consent in writing?

A: No. The opinion concludes that even with informed written consent, the conflicts are imputed across the firm under Prof.Cond.R. 1.10(a) and the firm could not reasonably believe it could competently and diligently represent both clients.

Q: What kind of conflict does same-transaction adverse representation create?

A: The opinion concludes it creates both a direct adversity conflict under Prof.Cond.R. 1.7(a)(1) and a material limitation conflict under Prof.Cond.R. 1.7(a)(2).

Background and rules framework

The opinion interprets Ohio Prof.Cond.R. 1.7 (concurrent conflicts; Model Rule 1.7), the screening definition in Prof.Cond.R. 1.0 (Model Rule 1.0), and the imputation rule Prof.Cond.R. 1.10(a) (Model Rule 1.10), including comments [16] and [38] to Rule 1.7. The opinion builds on Adv. Op. 2020-004, which addressed disparate-interest conflicts in the same matter.

Citations and references

Rules of Professional Conduct:

• Ohio Prof.Cond.R. 1.7(a)(1)-(2), (b) and cmts. [16], [38] (Model Rule 1.7)
• Ohio Prof.Cond.R. 1.0 (screening definition; Model Rule 1.0)
• Ohio Prof.Cond.R. 1.10(a) (imputation; Model Rule 1.10)

Cases:

• Stark Cty. Bar Assn. v. Erzagos, 2 Ohio St.3d 59, 44 N.E.2d 1286 (1982), discipline for representing adverse parties in one transaction

Other opinions cited:

• N.Y. Ethics Op. 2001-2; N.Y. St. Bar Assn. Op. 807 (2007); Ill. St. Bar Assn. Adv. Op. 17-04; R.I. Ethics Op. 2017-02

See also

• Ohio BPC Op. 2020-004: Concurrent Representation With Disparate Interests in the Same Matter
• Ohio BPC Op. 2019-001: Representation of an Adverse Party in Unrelated Matters
• CA Bar Op. 1999-153: Joint Representation of a Close Corporation and a Controlling Shareholder
• LA County Bar Op. 471: Informed Advance Consent to Future Conflict in Joint Representation

Source

• Landing page: https://ohioadvop.org/advisory-opinion-index/
• Original PDF: https://www.ohioadvop.org/wp-content/uploads/2020/10/Adv.-Op.-2020-10-Final.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

OPINION 2020-10
Issued October 2, 2020

Law Firm Concurrent Representation of Adverse Clients in the Same Transaction

SYLLABUS: A conflict of interest arises from a lawyer’s concurrent representation of
directly adverse clients in the same transaction. A law firm cannot avoid the imputation
of a conflict of interest arising from the concurrent representation of two clients in the
same transaction by screening separate lawyers assigned to each client.

This nonbinding advisory opinion is issued by the Ohio Board of Professional Conduct
in response to a prospective or hypothetical question regarding the application of
ethics rules applicable to Ohio judges and lawyers. The Ohio Board of Professional
Conduct is solely responsible for the content of this advisory opinion, and the advice
contained in this opinion does not reflect and should not be construed as reflecting the
opinion of the Supreme Court of Ohio. Questions regarding this advisory opinion
should be directed to the staff of the Ohio Board of Professional Conduct.
 65 SOUTH FRONT STREET, 5TH FLOOR, COLUMBUS, OH 43215-3431
Telephone: 614.387.9370 Fax: 614.387.9379
www.bpc.ohio.gov

HON. JOHN W. WISE RICHARD A. DOVE
CHAIR DIRECTOR
PATRICIA A. WISE D. ALLAN ASBURY
VICE- CHAIR SENIOR COUNSEL
KRISTI R. MCANAUL
COUNSEL

                                 OPINION 2020-10
                               Issued October 2, 2020

Law Firm Concurrent Representation of Adverse Clients in the Same Transaction

SYLLABUS: A conflict of interest arises from a lawyer’s concurrent representation of
directly adverse clients in the same transaction. A law firm cannot avoid the imputation
of a conflict of interest arising from the concurrent representation of two clients in the
same transaction by screening separate lawyers assigned to each client.

QUESTION PRESENTED:

   Whether lawyers in a law firm may represent two directly adverse clients in the

same transaction by screening separately assigned groups of firm lawyers and with the
informed, written consent of the affected clients.

APPLICABLE RULES: Prof.Cond.R. 1.0, 1.7, 1.10

OPINION:

   A law firm proposes to represent two long-term clients in connection with the

negotiation and documentation of a transaction. The clients would be represented by
two separately assigned groups of lawyers within the firm. Both clients are considered
sophisticated purchasers of legal services and employ one or more in-house legal counsel
on a full-time basis. The clients are aware of the fact that both use the same law firm for
legal services and understand that their interests would be adverse to one another in the
transaction. Each lawyer group will owe a duty of loyalty that runs only to the assigned
client in connection with the transaction. As a condition to the legal representation, the
clients and the law firm will agree to a consensual ethical screen. The screen will consist
Op. 2020-10 2

of a prohibition against lawyers in either group performing any services for the other
client, receiving and reviewing any information or data related to the other
representation, the preservation of client secrets and confidences, the restriction of
communication between lawyer groups relating to the services provided, securing
documents in the firm’s document management system, and affixing boxes containing
client files with confidential designations. Lastly, in the event of any litigation or
arbitration stemming from the representation of either client to the transaction, the law
firm and its lawyers agree not to represent either client.

Direct adversity and material limitation conflicts

   The law firm’s proposal correctly identifies that a conflict of interest

inherently arises from the representation of two clients in the same transaction. More
specifically, the Board finds that both a direct adversity and a material limitation
conflict exist under the facts presented. See Prof.Cond.R. 1.7, cmt. [16] (depending upon
the circumstances, a material limitation conflict of interest may be present in the
representation of concurrent clients in a transaction.) A direct adversity conflict prevents
a lawyer from representing two clients in the same matter unless the clients give their
informed, written consent to the conflict and the lawyer can provide competent and
diligent representation to both clients. Prof.Cond.R. 1.7(a)(1),(b). A material limitation
conflict exists where there is a substantial risk that the lawyer’s ability to consider,
recommend, or carry out an appropriate course of action for a client will be
materially limited by the lawyer’s responsibilities to another client, a former client, a
third person, or by the lawyer’s own personal interests. Prof.Cond. R. 1.7(a)(2). The
following are examples of interests that may impair the law firm’s lawyers’ individual
abilities to jointly and severally consider, recommend, or carry an appropriate course of
conduct for either client in the transaction: the lawyers’ respective loyalty to one or
both of the firm clients before or during the negotiation; the willingness to appease
or maintain working relationships with other members of the firm; the difficulty in
balancing of each assigned lawyer’s respective competency and experience between
the two lawyer groups; and the overarching goal of retaining both clients indefinitely
even if the negotiation becomes adversarial.
Op. 2020-10 3

Imputation of Conflicts of Interest

   Relevant to the conflict of interest analysis in this matter is the issue of imputation

within the law firm of the respective conflicts. In a law firm setting, a lawyer cannot
represent a client when the lawyer reasonably knows that any one of them practicing
alone would be prohibited from doing so under Prof.Cond.R. 1.7. Prof.Cond.R. 1.10(a).
For the purpose of analyzing conflicts of interests arising in a law firm, the firm is treated
as one lawyer, and a conflict created by the representation of a client by a lawyer in a firm
is imputed to the other lawyers in the firm. Id.

   The proposed consensual screen between groups of lawyers combined with the

informed consent of the clients is offered in an effort to avoid the imputation of the
conflict of interests that inherently exist in a concurrent representation. Screening is
defined in Prof. Cond. R. 1.0 and employed to prevent a disqualified lawyer’s access to
confidential client information. It is not identified as an acceptable method for the
amelioration of imputed concurrent conflicts under the circumstances at issue here. See
also, Prof.Cond.R. 1.10 (addressing the use of ethical screens in particular
circumstances.) Isolating a single lawyer from client information by way of an ethical
screen is very different from organizing two teams of lawyers within the same firm for
the purpose of contending against each other in the service of two of the firm’s clients
who wish to enter into a business transaction. The Rules of Professional Conduct do not
expressly recognize the combined use of screening and client consent in the manner
proposed by the law firm where the individual members of each team would be
disqualified from the proposed representation due to the imputation of conflicts. The
firm’s proposal would require a departure from the rules governing the imputation of
conflicts that the Board is unwilling to endorse.

   In a transaction involving adverse clients, it would be extremely difficult, if not

impossible, due to the directly adverse or material limitation conflicts that are present,
for even one lawyer to competently and diligently represent both clients in the proposed
transaction requiring the negotiation of material terms. While transactional clients may
share a common goal and there may be some tentative agreement as to certain terms of
the transaction, additional material terms that may not have been addressed before
negotiations began may result in disagreements that would place a jointly retained
lawyer in the impossible situation of negotiating for each client while maintaining a duty
Op. 2020-10 4

of loyalty to both. R.I. Ethics Op. 2017-02. In such a situation, the lawyer’s independent
professional judgment and ability to provide competent and diligent representation to
both clients would be compromised. See, e.g., Stark Cty. Bar Assn. v. Erzagos (1982), 2 Ohio
St.3d 59, 44 N.E.2d 1286 (lawyer disciplined under former Code of Professional
Responsibility for representing three adverse parties in the same transaction.)

    In a law firm setting, due to the imputation of conflicts among lawyers, the same

types of issues and problems may arise for separately assigned lawyers in a concurrent
representation that cannot be adequately resolved through a combination of client
consent and screening. Consequently, a law firm’s obligations and loyalties to the
respective clients may become so divided that the law firm, treated as one lawyer through
imputation, could not reasonably believe that it would be able to provide competent and
diligent representation to both clients. See Prof.Cond.R. 1.7, cmt. [38] (some conflicts are
nonconsentable because a lawyer cannot represent both clients competently and
diligently.)

   Other jurisdictions have also found concurrent representation in a transaction of

adverse clients by the same law firm or lawyer to be problematic. For example, one
jurisdiction has opined that if corporate clients request that the same firm represent both
of them in the purchase and sale of a subsidiary and the dual representations require
lawyers in the firm to directly negotiate the substantive business terms with each other,
then the existence of direct adversity would preclude such concurrent representation
even with client consent. N.Y.Ethics Op. 2001-2. In another jurisdiction, even the most
basic of real estate transactions has been determined to be improper for concurrent
representation, including an arm-length sale between a willing buyer and seller,
regardless of the consent of the parties to a waiver of the conflict. Ill. St. Bar Assn. Adv.
Op. 17-04. See also N.Y St. Bar Assn. Op. 807 (2007) (the buyer and seller of residential
real estate may not engage separate attorneys in the same firm to advance each side's
interests against the other, even if the clients give informed consent to the conflict of
interest).

   The transaction between the two clients in the question presented is undoubtedly

more complicated than a simple real estate transaction and therefore creates a greater
potential for issues to arise during the negotiation that would render it impossible for the
Op. 2020-10 5

firm to provide diligent and competent representation to both clients while maintaining
loyalty to both clients.

CONCLUSION:. The steps proposed by the law firm in order to represent the two clients
underscore the inherent nature of the conflict of interests that exist in the concurrent
representation of two or more firm clients in the same transaction. The key features of
the law firm’s proposal to resolve the conflicts, a combination of client consent and the
screening of two groups of assigned lawyers, is not provided for in the Rules of
Professional Conduct as a method to ameliorate conflicts arising from concurrent
representation in the same law firm. The firm’s proposal would require a departure from
the rules governing the imputation of conflicts that the Board is reluctant to endorse. For
the foregoing reasons, the Board concludes that the law firm’s proposed concurrent
representation of the two adverse clients in the same transaction is not permissible.