When an agent under a durable power of attorney hires a lawyer to get a client onto Medicaid, and the agency claims the agent mismanaged the client's money, does that create an unwaivable conflict?

Plain-English summary

A lawyer (the requesting attorney, or RA) represents low-income clients, often elderly nursing-home residents, in Medicaid eligibility proceedings before county social services and the North Dakota Department of Human Services (DHS). Frequently a client's child, acting as agent under a durable power of attorney, contacts the lawyer and asks him to represent the client. DHS sometimes argues that the agent has mismanaged the client's money, so the client has a claim against the agent, and that the claim is itself an asset disqualifying the client from Medicaid. DHS took the position that this gives rise to a conflict preventing the lawyer (or any lawyer hired by the agent) from representing the client. The lawyer asked the committee to consider both a competent client and an incapacitated client.

The committee applied Rule 1.7. It first identified the client: a client is one who is rendered, or who consults a lawyer to obtain, professional legal services, so the Medicaid applicant is plainly the client. Because the lawyer owes no duty of loyalty to the agent, the agent is not a client, even though the lawyer may work closely with the agent. The committee noted it is prudent, when an agent engages counsel, to confirm in writing at the outset who the client is and the nature of the relationship with the agent.

The committee then asked whether the agent-mismanagement claim creates a "material limitation" on the representation. It explained that a Rule 1.7(a) or (b) conflict (where the representation will be, or the lawyer's own interests are likely to be, adversely affected) is unwaivable, but a Rule 1.7(c) conflict (where the representation might be adversely affected) is waivable with the client's informed consent. On these facts there may be no material limitation at all. The risk the committee identified was practical: if the agent is the primary conduit of information, the lawyer's ability to represent the client could be impaired, so the lawyer must keep his loyalty directed to the client and investigate the claims thoroughly. If the lawyer believes the representation might be adversely affected, he may proceed only if he reasonably believes it will not be and the client consents; for an incapacitated client, the lawyer should seek appointment of an independent guardian to decide on consent, consistent with Rule 1.14 (client under a disability).

In practice

This 2008 opinion applies North Dakota Rules of Professional Conduct 1.7 and 1.14. Under those rules, the committee held that when an agent under a power of attorney retains counsel for a Medicaid applicant, the only client is the applicant, and the agency's claim that the agent mismanaged the client's funds does not create an unwaivable conflict. The committee held the situation is at most a Rule 1.7(c) potential conflict: the lawyer may continue only if he reasonably believes the representation will not be adversely affected by his relationship with the agent; if he believes it might be, he must obtain the client's consent after consultation, and if the client is incapacitated, he should request appointment of an independent guardian to consider consent. The committee held it is prudent to confirm the client's identity and the agent relationship in writing at the outset.

Common questions

Q: When an agent hires the lawyer, is the agent the client?

A: No. The committee said the only client is the person the lawyer represents (the Medicaid applicant), because the lawyer owes no duty of loyalty to the agent. It recommended confirming the client's identity and the agent relationship in writing at the start.

Q: Does the agency's mismanagement claim against the agent automatically disqualify the lawyer?

A: No. The committee concluded it does not create an unwaivable conflict. At most it is a Rule 1.7(c) conflict, which the lawyer may take on if he reasonably believes the representation will not be adversely affected and the client consents.

Q: What changes if the client is incapacitated?

A: The committee said that if the client is incapacitated and the lawyer believes the representation might be adversely affected, the lawyer should request appointment of an independent guardian to decide, after consultation, whether to consent, consistent with the lawyer's special obligations under Rule 1.14.

Background and rules framework

The opinion interprets North Dakota Rules of Professional Conduct 1.7 (Model Rule 1.7, conflicts of interest) and 1.14 (Model Rule 1.14, client under a disability). The analysis turns first on identifying the client when a third-party agent engages the lawyer, and then on the distinction the 2008 North Dakota rule drew between unwaivable conflicts under paragraphs (a) and (b) and waivable potential conflicts under paragraph (c).

The opinion is issued under North Dakota Rule for Lawyer Discipline 1.2(B), the safe-harbor provision protecting good-faith reliance on a written ethics-committee opinion.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.7 / N.D.R. Prof. Conduct 1.7 (conflicts of interest, general rule)
• Model Rule 1.14 / N.D.R. Prof. Conduct 1.14 (client under a disability)
• N.D.R. Lawyer Discipline 1.2(B) (safe harbor for reliance on a committee opinion)

Cases:

• Board of Overseers of the Bar v. Mangan, 763 A.2d 1189 (Me. 2001) (definition of "client")
• In re Disciplinary Action against Bullis, 2006 ND 228, 723 N.W.2d 667 (loyalty as an essential element of the lawyer-client relationship)
• Continental Resources, Inc. v. Schmalenberger, 2003 ND 26, 656 N.W.2d 730 (conflicts impair loyalty)

See also

• ABA Formal Op. 96-404: Client Under a Disability
• AL Ethics Op. 1995-03: Guardian for a Disabled Client

Source

• Landing page: https://www.sband.org/page/ethics_opinions
• Original PDF: https://cdn.ymaws.com/www.sband.org/resource/resmgr/docs/for_lawyers/opinion_08-01.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

STATE BAR ASSOCIATION OF NORTH DAKOTA
ETHICS COMMITTEE
Opinion No. 08-01
April 10, 2008

By letter dated December 6, 2007, the Committee received a request to determine whether the
North Dakota Rules of Professional Conduct prevent Requesting Attorney (“RA”) from
representing a client under the following circumstances.

Representation by RA is requested by an Agent holding a Durable Power of Attorney (“Agent”).
The representation is of a client in front of the County Social Services Board and the North
Dakota Department of Human Services (“DHS”). The representation is by RA on behalf of the
client claiming the client meets the financial guidelines for Medicaid. If DHS — the opposing
party in Medicaid Administrative proceedings ~ defends that the client has a claim, i.e., an asset,
against the Agent, does this claim present an unwaivable conflict of interest preventing RA from
representing the client?

RA asks that the Committee consider two separate circumstances.

1. The client is competent.
2. The client is incapacitated.

FACTS

RA practices law in North Dakota. RA and the legal group for which he works only represent
clients with limited resources. RA represents individuals in Medicaid Administrative
proceedings. The clients are often elderly and sometimes reside in nursing homes. Frequently,
the clients have appointed an Agent to act on their behalf through a Durable Power of Attorney.
Generally, that Agent is one of the children of the client. The Agent contacts the RA on behalf
of the client with the request that the RA represent the individual/client.

Prior to accepting representation, RA requests information about the client’s income and
resources. In other words, the client must qualify for RA’s services under RA’s financial
guidelines. RA considers the income and resources of the individual/client and not the Agent. If
the individual/client qualifies for RA’s services, an attorney-client relationship is created and it is
specifically between the client and the RA. The RA does not consider the Agent to be the client,
though RA may work very closely with the Agent in some cases.

DHS, the opposing party in Medicaid Administrative hearings, sometimes takes the position that
the Agent has not handled the money and property of the client in a prudent manner. As a result
of this alleged lack of prudent management, DHS contends the client has a claim against the
Agent and that claim is an asset that impacts eligibility for Medicaid. Such a claim against the
Agent is deemed to be a financial asset that would disqualify the client from Medicaid eligibility.

If RA determines the Agent is not self-dealing or committing some other act contrary to the
client’s interest, RA advocates at the Administrative Hearing that the client is eligible for
Medicaid because the client has no claim against the Agent for mismanaging his or her property.

DHS’s position is that its claim that the Agent has acted improperly in handling the client’s
affairs creates a conflict preventing RA — or any other attorney hired by the agent — from
representing the client.

RA asks that for purposes of this Ethics Opinion that the Ethics Committee consider two separate
scenarios: (1) the client is competent and (2) the client is incapacitated.

DISCUSSION

A. The Rules
The relevant rule of Professional Conduct is Rule 1.7 Conflict of Interest: General Rule.

The Rule states in relevant part:

(c) A lawyer shall not represent a client if the representation of that client
might be adversely affected by the lawyer’s responsibilities to another
client or to a third person, or by the lawyer’s own interests, unless:

(1) the lawyer responsibly believes the representation will not be
adversely affected; and

(2) the client consents after consultation. When representation of
multiple clients in a single matter is undertaken, the consultation
shall include explanation of the implications of the common
representation and the advantages and risks involved.

N.D.R.Prof. Conduct 1.7(c).

The comment to Rule 1.7 provides guidance on the resolution of conflict questions. The
comment states in relevant part:

(4) Resolution of a conflict of interest problem under this Rule requires the lawyer
to: 1) clearly identify the client or clients; 2) determine whether a material
limitation on the representation of the client exists; 3) decide whether the
representation may be undertaken despite the material limitation, i.e., whether the
conflict is consentable; and 4) if so, consult with the clients affected under
paragraph (c) and obtain their consent. The clients affected under paragraph (c)
include any clients whose representation might be adversely affected. The critical
questions are the likelihood that a material limitation will eventuate and, if it does,
the likelihood that the conflict will interfere with the lawyers independent
professional judgment in considering alternatives or foreclose courses of action
that reasonably should be pursued on behalf of the client.

N.D.R. Prof. Conduct 1.7, comment 4.

B. Conflict of Interest — Generally

Under Rule 1.7, an attorney must decide (1) the identity of the client(s); and (2) whether there is
any adverse affect (material limitation) on the representation due to relationships with another
client, third parties or due to the attorney’s own interests, N.D.R. Prof. Conduct 1.7(a); whether
the attorney’s own interests are likely to adversely affect the representation, N.D.R. Prof.
Conduct 1.7(b); or whether there might be any adverse affect (material limitation) on the
representation due to relationships with another client, third parties or due to the attorney’s own
interests, N.D.R. Prof. Conduct 1.7(c). If either of the first two inquiries under (2) above is
answered in the affirmative, there is an unwaivable conflict of interest. Only if Rule 1.7(c)
applies, does the attorney consider waiver/consent of the client.

1. Identification of the client or clients

“[T]he term ‘client’ includes one who is either ‘rendered professional legal services by a lawyer,
or who consults a lawyer with a view to obtaining professional legal services from him.’” Board
of Overseers of the Bar v. Mangan, 763 A.2d 1189, 1192 (2001). Under this definition, the
Medicaid applicant is plainly the client of the RA. RA is rendering legal services on the
applicant’s behalf and the individual’s Agent, on his or her behalf has requested that professional
legal services be rendered on his or her behalf, i.e., representation in the Medicaid proceedings.

However, the Committee must also consider whether the Agent (holder of the Durable Power of
Attorney) has an attorney-client relationship with the RA.

Two ethical duties are entwined in any attorney-client relationship. First is the
attorney's duty of confidentiality, which fosters full and open communication
between client and counsel.... The second is the attorney's duty of undivided
loyalty to the client.” (City and County of San Francisco v. Cobra Solutions, Inc.
(2006) 38 Cal.4th 839, 846.) “The interplay of the duties of confidentiality and
loyalty affects the conflict of interest rules that govern attorneys.” ([bid.)

Phillips v. Yapo, 2007 WL 4239991, * 3 (Cal.App. Dec. 4, 2007).

An attorney-client relationship is marked by the requirement of both confidentiality and
loyalty. See also N.D.R. Prof. Conduct 1.7, comment (“Loyalty and independent
judgment are essential elements in the lawyer’s relationship to a client.”). “Conflicts of
interest affect a lawyer's loyalty, which “‘is an essential element in the lawyer's
relationship to a client. Comment, N.D.R. Prof. Conduct 1.7; see also Continental Res.,
Inc. v. Schmalenberger, 2003 ND 26, J 12, 656 N.W.2d 730. When a lawyer has
conflicting responsibilities as the lawyer for various clients, those loyalties owed to the
client are impaired. See Jn_ re Christensen, 2005 ND 87, J 14, 696 N.W.2d 495.” In the
Matter of Disciplinary Action against James J. Bullis, 2006 ND 228, J 13, 723 N.W.2d
667, 671.

Because the RA does not owe a duty of loyalty to the Agent, under these facts, the Agent is not a
client of RA. The only client is the applicant for Medicaid benefits.

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When an attomey is engaged by an agent, it is a prudent practice for the attorney at the
commencement of the representation to confirm in writing the identity of the client and the
nature of the relationship with the agent.

2. Material limitation on the representation of the client

To determine whether a material limitation exists, the RA must decide whether he cannot or may
not be able to consider, recommend, or carry out an appropriate course of action for the client
because of his other responsibilities or interests in this case to the third party Agent. See N.D.R.
Prof. Conduct 1.7, comment 3. RA must decide if he can vigorously represent the client despite
the alleged claim against the Agent. Although RA does not formally have any responsibilities or
interest in the Agent, the RA may be hindered in his or her representation of the client if the
client is unable to participate in the litigation and defense of his or her case. In other words, if
the Agent is the primary conduit of information used to represent the client, adequate
representation of the client may be impacted. The RA must ensure that his loyalties are directed
to the client and not the Agent. Further, the RA must ensure that he has the ability to investigate
all claims thoroughly.

i. Competent Client. If the client is competent, the RA may not have a conflict of
interest in continuing the representation despite the mismanagement of funds
claim by DHS because there may not be a material limitation on the RA’s
ability to represent the client. Depending upon the specific facts of each case
and the RA’s judgment as to whether the Agent’s involvement may adversely
impact the lawyer’s representation of the client, the RA may need to request that
the client consent to the representation. Therefore, if RA believes that “the
representation of the client might be adversely affected, “ Rule 1.7(c), then in
order to continue representation, the RA must reasonably believe that the
representation will not be adversely affected and the client must consent after
consultation.

ii. Incapacitated Client. If the client is incapacitated, the RA may not have a
conflict of interest in continuing the representation despite the mismanagement
of funds claim by DHS because there may not be a material limitation on the
RA’s ability to represent the client. Depending on the specific facts of each
case and the RA’s judgment as to whether the Agent’s involvement may
adversely impact the lawyer’s representation of the client, the RA may need to
request that the incapacitated client be appointed an independent guardian who
may decide after consultation whether consenting to representation is
reasonable. Therefore, if RA believes that “the representation of the client
might be adversely affected,” Rule 1.7(c), then in order to continue
representation, the RA must reasonably believe that the representation will not
be adversely affected and the client’s independent guardian must consent after
consultation.

Attorneys with a client under a disability have a special obligation to that client. See
N.D.R. Prof. Conduct 1.14 Client under a Disability. The comment to Rule 1.14 states in

relevant part:
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In those situations where a legal representative has not been appointed but in the
lawyer’s professional judgment such an appointment would serve the client’s best
interest, or is in fact necessary for the effective completion of a transaction
involving the client’s property, the lawyer should seek to have a legal
representative appointed to act on behalf of the client. The nature and extent of
the client’s disability may be disclosed by the lawyer to the extent the lawyer
reasonably believes necessary to obtain the appointment of a legal representative.

N.D.R. Prof. Conduct 1.14, comment.

CONCLUSION

The RA may represent the client despite DHS’s claim that the Agent mismanaged the client’s
funds and, therefore, the client has an asset disqualifying him or her from Medicaid eligibility
only if the RA believes that his representation of the client will not be adversely affected by
RA’s relationship with the Agent. If RA believes that his representation of the client might be
adversely affected by his relationship with the Agent, but he reasonably believes that it will not
be adversely affected, the RA must seek client consent after consultation with the client. If the
client is incapacitated, RA must request that an independent guardian be appointed to consider
whether consent after consultation is appropriate.

This Opinion is provided pursuant to Rule 1.2(B) of the North Dakota Rules for Lawyer
Discipline. This rule provides:

A lawyer who acts with good faith and reasonable reliance on a written opinion or
advisory letter of the ethics committee of the association is not subject to sanction
for violation of the North Dakota Rules of Professional Conduct as to the conduct
that is the subject of the opinion or advisory letter.

This Opinion was drafted by Adele Page and unanimously approved by the Committee
on April 10, 2008.

A ;
Sn Greenwood, Chair