Concept
Material Limitation
Identify a concurrent conflict of interest
Material Limitation
Rule 1.7(a)(2) supplies the second definition of a concurrent conflict: there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client, or a third person, or by a personal interest of the lawyer.1 The first definition asks whether the lawyer will act against a client.2 This one asks whether the lawyer can still do the whole job. A lawyer may oppose no one and yet hold back, because a commitment outside the representation makes it hard to recommend the best course or to carry it out.
The rule defines the category by its effect on the lawyer’s performance, so a single test covers every pressure it names. Identify a duty the client is owed, identify what is pulling on the lawyer, and ask whether the pull creates a significant risk that the duty will go unperformed.3 The duties most often at stake are confidentiality, competence, loyalty, and independence.4
The unit moves in two stages. The next subsection fixes the threshold, because every later application depends on what makes a limitation material and how much risk counts as significant. The remaining subsections take the sources of pressure one at a time: another client (with positional conflicts as a special case), a former client, a third person, and the lawyer’s own interest. Throughout, a finding of material limitation establishes only that a concurrent conflict exists. Whether the lawyer may proceed anyway is the question paragraph (b) answers.5
The Significant-Risk Test
Two phrases in Rule 1.7(a)(2) do separate work. “Materially limited” names the harm the rule fears, and “significant risk” sets how likely that harm must be.6 Keep them apart, because exam facts often supply one without the other. A severe but remote harm fails the second phrase. A likely difference in interests that leaves the client’s options untouched fails the first.
A limitation is material when it changes what the client can obtain from the lawyer. An opinion in Cincinnati Insurance Co. v. Wills puts the point as foreclosed alternatives: loyalty is impaired when a lawyer cannot consider, recommend, or carry out an appropriate course of action because of other responsibilities or interests, and the conflict in effect forecloses alternatives that would otherwise be available to the client.7 The client rarely sees the loss, since no one can miss an option the lawyer never mentions.
Significance has two parts, both drawn from a comment to Rule 1.7. The lawyer considers the likelihood that a difference in interests will eventuate and, if it does, whether it will materially interfere with the lawyer’s independent professional judgment in considering alternatives or foreclose courses of action that reasonably should be pursued for the client.8 Only a realistic prospect of real interference satisfies both.
The bar sits at significant risk, and not at mere possibility, because some possibility of differing interests accompanies every simultaneous representation.9 The 1992 version of the Model Rules, reproduced in a footnote to Griva v. Davison, framed the question as possibility: whether a representation “may be” materially limited.10 The current rule asks instead whether the risk is significant, and that change keeps the concept for facts that show a realistic prospect of narrowed advice.
One court applying the current rule faced a lawyer who represented both a limited liability company and the holder of a controlling interest in it. The court focused on the degree of risk that the lawyer would be unable to fulfill duties to both clients. It found the defendants’ interests not adverse in the present posture of the case and saw no substantial evidence that they would likely become adverse, particularly because one defendant was a limited liability company and the other held its controlling interest. It therefore found no significant potential for divergence and no present conflict.11 A conceivable split was not enough. The court looked for substantial evidence that a split was likely.
A realistic prospect of narrowed advice looks different.
The difference from the controlled-company case lies in where the divergence comes from. There, any split depended on a prediction about how the litigation might unfold. Here the disagreement exists now. The comment on multiple representation lists the kinds of divergence that raise the risk: a substantial discrepancy in the clients’ testimony, incompatibility in positions in relation to an opposing party, and substantially different possibilities of settlement.12 When the clients’ interests largely coincide and conflict is insignificant, Rule 1.7 does not demand consent to the shared representation. When there is a significant risk that the interests will diverge, even on what look like minor points, so that the lawyer’s loyalty would be divided, a present conflict exists, and the lawyer may proceed only if informed consent can be obtained.13 The usual error is to treat a conceivable collision as enough. Ask of any fact pattern whether its facts make the divergence likely and capable of closing off options the client should have.
Duties to Another Client
Rule 1.7(a)(2) lists responsibilities to another client first among the outside pressures,15 and the most familiar form is a collision between what the lawyer owes one current client and what the lawyer owes another. Confidentiality sets up that collision most often because it cuts two ways. The lawyer may not disclose a client’s information without the client’s informed consent, implied authorization, or an applicable exception in Rule 1.6(b), and the lawyer may not make adverse use of it either.16 A second client can put either edge under strain.
Suppose a lawyer represents Company A, which is considering an effort to acquire Company B. Could the lawyer also represent B? Not without the consent of both clients. The duties of communication and reasonable care owed to B may require the lawyer to pass along information about possible takeover bids, perhaps so that B can prepare takeover defenses, and doing so would violate the confidentiality owed to A.17 Every course fails someone. Telling B breaches A’s confidence. Staying silent shortchanges B. Advising B while steering around the secret leaves B with advice shaped by something B cannot see. In the vocabulary of the test above, the alternative B most needs, preparing for the bid, is foreclosed by a duty owed to A, and the likelihood is high because the two duties collide directly.
The definition does the rest of the work. When there is a risk that a lawyer will violate a duty owed to one client because of a relationship with another, there is by definition a conflict of interest under Rule 1.7(a).18 The risk is complete once the lawyer would take on B, because the lawyer would then owe B the duties that A’s secret prevents the lawyer from performing. No one has to wait for a disclosure or an injury. This is also why the first definition has nothing to hold: the lawyer is not yet advocating against B in any matter, so the problem sits in the second definition.
Knowing A’s secret does not taint every engagement the lawyer might later accept.
The lawyer, the secret, and the first client are the same in both scenes, and only the second matter changed. The contrast with direct adversity is instructive. A lawyer who gives general business advice to Earl’s Rooter and then takes a personal injury case against it by a driver hit by one of its trucks is directly adverse to a current client, and it makes no difference that the matters are unrelated.19 Material limitation asks whether a duty owed to one client realistically interferes with the work for the other, so the content of the two matters decides the answer. A confidence with no bearing on the second engagement limits nothing in it.
An exam answer therefore asks two questions in order. What confidential information does the lawyer hold from one client? Is the new client’s matter one in which that knowledge would change what the lawyer should say or do? A yes to the second question produces a conflict, as with Company B. A no produces none, as with the lease for Company C.
Positional Conflicts
A lawyer who argues inconsistent legal positions for different clients is not directly adverse to either of them, so any conflict comes through the second definition, which asks whether the representation of one client will be materially limited by the lawyer’s responsibilities to another.21 The comment to Rule 1.7 begins with freedom: “[o]rdinarily, a lawyer may take inconsistent legal positions in different tribunals at different times on behalf of different clients.”22 It then marks the exception. The significant-risk-of-material-limitation part of the rule can be violated “when a decision favoring one client will create a precedent likely to seriously weaken the position taken on behalf of the other client.”23 The skill lies in telling the ordinary case, where the freedom governs, from the exceptional one.
Precedent is the shared resource that makes the exception possible. Appellate courts have two roles: they decide the case before them, and they make precedent. An appellate lawyer must therefore ask what the opinion will do to a position taken for another client in a different matter that the same precedent will govern.24 The pressure also runs the other way. A lawyer who sees how two cases interlock may be tempted to soft-pedal arguments in one client’s case to favor the interests of another client in a second case.25 A client whose best argument is quietly muted has lost exactly the sort of alternative that marks a material limitation.
The conflict there does not depend on the clients’ having anything to do with each other. It depends on the identity of the legal question and on a link between the two outcomes. Put one question to any fact pattern of this kind: is a ruling for either client likely to bind or persuade the tribunal that will decide the other client’s matter?
The two positions in the second scene are inconsistent on paper, but no precedent ties the outcomes together, so neither client’s advocacy is realistically at risk. Exam answers go wrong in two directions. One treats inconsistent positions as a conflict in themselves, and the other concludes that no conflict exists because the clients are not adverse to each other. Whether clients in a positional conflict may consent belongs to paragraph (b).26
Duties to Former Clients
Rule 1.7(a)(2) names responsibilities to a former client as a source of material limitation, which can seem odd for someone the lawyer no longer represents.28 The explanation is that a representation’s end releases some duties and leaves others in place. After the work is done, the lawyer no longer owes a duty of reasonable care to pursue the client’s objectives. Two duties persist. The lawyer must keep protecting the former client’s confidential information from disclosure (Rule 1.6(a)) and adverse use (Rule 1.8(b)), and the lawyer must not attack work performed for that client while representing a new one.29 Those surviving duties are the outside pull that Rule 1.7(a)(2) asks about, and the method is the one used throughout this unit.
Cross-examination shows the pull most clearly. A defense lawyer who has previously represented a victim or a prosecution witness may hesitate to proceed as vigorously as she otherwise might, or may fail to cross-examine rigorously for fear of misusing confidential information.30 The defendant is owed the strongest impeachment the lawyer can honestly build. The confidentiality still owed to the witness may close off the best line of questioning. An alternative the defendant should have is foreclosed by a duty owed to someone who is no longer a client, and the defendant cannot see the questions the lawyer chose not to ask. The first definition does not capture this, since the witness is not a current client, and so the problem is a material limitation. The second surviving duty pulls the same way. A lawyer who drafted a will for one client is poorly placed to argue for a new client that the will is invalid.
Rule 1.9, the successive-representation conflicts rule, rests on the same two surviving duties, and a separate reading takes up its own test.31 Rule 1.7(a)(2) addresses a narrower question: whether a surviving duty to a former client narrows what the lawyer can do for a client the lawyer is serving now.
The lawyer in the cross-examination scene and the lawyer in the trademark scene owe the same kinds of surviving duties, yet only the first lawyer’s work runs into them. What moves the answer is whether the current matter would call on the confidences or the earlier work. Students err in two ways: treating former-client status as the end of the inquiry, which misses the cross-examination problem, and treating it as the start of a conflict, which misreads the trademark scene. The surviving duty must realistically bite on the current representation before a material limitation exists.32
Third-Person Responsibilities
The rule’s reference to responsibilities to a third person reaches, among others, the person who pays the lawyer’s fee. A payer is not a client, so the first definition, which requires direct adversity to another client, does not apply.34 The question runs through material limitation: does the payer’s role give the lawyer a reason to shade the advice?35 A third party with an interest in the case who pays defense counsel’s fees presents a conflict situation analogous to those above.36
A payer controls something the lawyer wants. When a liability insurer pays for a lawyer’s services to the insured, the opinion in Cincinnati Insurance Co. v. Wills quotes the danger this way: “a danger exists that the lawyer will tailor his or her representation to please the third party, rather than the client.” The distraction “can become acute if the lawyer hopes to be rehired on behalf of other clients, and so curries favor with the payor of his fee.”37 The client cannot see the argument left unmade or the course left unmentioned, which is the hidden narrowing described at the start of this unit.
The same pressure appears in sharper form in criminal defense. In Wood v. Georgia, an employer of an alleged criminal enterprise provided legal assistance to its employees, and defense counsel in that position acts as an agent of the employer, so the risk of conflict is evident.38 Two risks follow. The lawyer may prevent a client from obtaining leniency by keeping the client from offering testimony or taking other actions contrary to the employer’s interest. The lawyer may also leave unraised arguments favorable to the employees in order to force a hopefully favorable ruling on an issue in which the employer has a long-range interest.39 When every defendant’s best course would hurt the payer, the payer’s interest has become a pull on the lawyer’s work.
A relative who pays the fee fits the same pattern, with a qualification. A lawyer may represent an older person even though someone else pays the legal costs, if the older person is informed and consents and the lawyer determines that the arrangement will not interfere with the lawyer’s independence of professional judgment or with the client-lawyer relationship. Rule 1.8(f).40 The older person remains the client. Rule 1.7(a)(2) asks what lies behind that condition: whether the payer’s stake gives the lawyer a reason to soften advice.
On these facts exam answers go wrong in two directions. One error treats the payer as a client, so that the lawyer supposedly takes the payer’s instructions. The other treats any third-party payment as a conflict in itself. The correct analysis keeps the duties with the client and then asks whether the payer’s stake creates a realistic risk that the lawyer will hold back or tailor advice. Whether the conflict may be waived is a separate question under paragraph (b).41
Lawyer’s Personal Interests
The last clause of Rule 1.7(a)(2) makes the lawyer’s own stake a source of material limitation.43 Here the pull comes from the lawyer’s business, finances, or convictions, and no one else is owed anything. The first definition cannot reach it, because the lawyer’s interest is not a client.44 The duty most exposed is independence, meaning the ability to advise the client based only on considerations that pertain to the client’s legal situation.45
Because a personal stake seldom produces open betrayal, the test asks about risk and not about intent. If you could imagine a dishonest, lazy, or careless lawyer failing to carry out a duty owed to the client because of a personal interest, there is a conflict, and far-fetched possibilities do not count.46 The lawyer’s sincere belief in her own objectivity therefore does not end the inquiry.
The size of the stake matters. A lawyer retained to pursue a claim against a social club she belongs to, or against a corporation whose shares are a minimal part of her investment portfolio, might reasonably believe the interest is inconsequential and unlikely to influence her judgment, and after being informed of the risks the client might agree.47 Half ownership of a direct competitor sits at the other end, because there the client’s success is the lawyer’s loss.
A fee arrangement can create the stake. A compensation agreement that gives defense counsel an interest in royalties from a book or movie portraying the trial can set the lawyer’s interest against the defendant’s.48 A lawyer who represents a start-up company in exchange for some of its stock acquires an ownership interest adverse to the client, and Rule 1.8(a) applies whenever a lawyer knowingly acquires an ownership, possessory, security, or other pecuniary interest adverse to a client.49
A personal stake can also be a conviction. Suppose a lawyer represents the owner of a gun shop on transactions with suppliers and tax matters while pursuing law reform proposals to restrict private ownership of firearms. If, during the reform work, the lawyer develops repugnance toward firearms retailers, regarding them as unsavory weapons dealers whose trade harms society, a conflict of interest may arise, and the lawyer may be unable to continue.50 Rule 6.4 disclaims a conflict based solely on a lawyer’s general participation in law reform activity. A lawyer nonetheless has an impermissible personal conflict if personal beliefs and activities undermine continuing loyalty to the client, even when an outside observer would see no objective conflict.51
Students err in two directions here. Some treat any reform activity as a conflict, and others treat the lawyer’s sincere belief in her own objectivity as the end of the inquiry. The question is whether the personal stake or conviction creates a significant risk that the lawyer will hold back for the client. Finding a personal-interest conflict again establishes only that the conflict exists, and whether the lawyer may go forward is the question paragraph (b) answers.52