A Lawyer’s Ethical Obligation When Clients’ Interests Diverge

How Mediators Manage Their Own BiasesLawyers are sometimes placed in a position where one client’s interest is contrary to another’s. Then what is the lawyer ethically required to do?

When the conflict is obvious—when two clients are on opposite sides of the same matter—the answer is clear. The lawyer must decline to represent one of the parties. If the lawyer has prior relationships with both parties, so that the lawyer has information that would help either party against the other, then the lawyer may not be able to represent either side in the dispute at hand.

The harder case is when the two clients are not involved in a dispute with each other, but their interests in a particular matter are opposed. An example of this situation arose in Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, 473 Mass. 336 (2015).

In Maling, the plaintiff sought to hire the Finnegan law firm to obtain a patent on a screwless eyeglass hinge block. The law firm’s office in another city was seeking related patents for one of Maling’s competitors, Masunaga Optical Manufacturing Co., Ltd.

When Maling found out that the law firm was representing his competitor, he sued, arguing that he wouldn’t have sought his own patent had the firm told him about Masunaga Optical’s head start. By the time he learned of the conflict, Maling had spent millions of dollars developing products based on his unpatentable invention.

Although lower courts dismissed his case, Maling appealed to the Massachusetts Supreme Judicial Court. The Court ruled that “the simultaneous representation by a law firm in the prosecution of patents for two clients competing in the same technology area for similar inventions is not a per se violation” of the Massachusetts Rules of Professional Conduct. The Court’s rationale was that representation in unrelated matters of clients whose interests are only economically adverse, not legally adverse, does not ordinarily constitute a conflict of interest.

Despite ruling in Maling’s favor, the Court concluded:

“Although Maling’s complaint does not plead an actionable violation of rule 1.7 [of the Massachusetts Rules of Professional Conduct] sufficiently, the misuse of client confidences and the preferential treatment of the interests of one client, to the detriment of nearly identical interests of another, are serious matters that cannot be reconciled with the ethical obligations of our profession.

“. . . As noted throughout this opinion, there are various factual scenarios in the context of patent practice in which a subject matter conflict may give rise to an actionable violation of rule 1.7.”

Thus, the Court stressed that attorneys need to be careful in taking on representation of one client “to the detriment of nearly identical interests of another.” Under other facts, this case could have gone the other way, and the law firm might have lost.

Even though the law firm in Maling won, lawyers are best served if they broadly interpret what their client’s interests are and communicate with the client if any potential conflict with those interests might exist. Only in that way can attorneys protect themselves and their firms.

Clients expect that lawyers will keep their confidential information confidential, that lawyers will not deal with persons and entities adverse to the clients’ interests, and that their attorneys will advocate zealously on their behalf. Representing clients with divergent or opposing interests makes it difficult for lawyers to fully comply with their ethical obligations.

Lawyers, have you ever dealt with situations where clients had potentially divergent positions? What did you do about it?

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