Ind. Prof. Cond. Rule 1.7

Effective January 1, 2005

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:

(1) the representation of one client will be directly adverse to another client; or

(2) 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.

(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a

lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and

diligent representation to each affected client;

(2) the representation is not prohibited by law;

(3) the representation does not involve the assertion of a claim by one client against

another client represented by the lawyer in the same litigation or other proceeding before

a tribunal; and

(4) each affected client gives informed consent, confirmed in writing.

Comment

General Principles

[1] Loyalty and independent judgment are essential elements in the lawyer's relationship

to a client. Concurrent conflicts of interest can arise from the lawyer's responsibilities to

another client, a former client or a third person or from the lawyer's own interests. For specific Rules regarding certain concurrent conflicts of interest, see Rule 1.8. For former client conflicts of interest, see Rule 1.9. For conflicts of interest involving prospective clients,

see Rule 1.18. For definitions of “informed consent” and “confirmed in writing,” see Rule

1.0(e) and (b).

[2] 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 conflict of interest exists; 3)

decide whether the representation may be undertaken despite the existence of a conflict,

i.e., whether the conflict is consentable; and 4) if so, consult with the clients affected

under paragraph (a) and obtain their informed consent, confirmed in writing. The clients

affected under paragraph (a) include both of the clients referred to in paragraph (a)(1) and

the one or more clients whose representation might be materially limited under paragraph

(a)(2).

[3] A conflict of interest may exist before representation is undertaken, in which event the

representation must be declined, unless the lawyer obtains the informed consent of each

client under the conditions of paragraph (b). To determine whether a conflict of interest

exists, a lawyer should adopt reasonable procedures, appropriate for the size and type of

firm and practice, to determine in both litigation and non-litigation matters the persons and

issues involved. See also Comment to Rule 5.1. Ignorance caused by a failure to institute

such procedures will not excuse a lawyer's violation of this Rule. As to whether a client-lawyer relationship exists or, having once been established, is continuing, see Comment

to Rule 1.3 and Scope.

[4] If a conflict arises after representation has been undertaken, the lawyer ordinarily must

withdraw from the representation, unless the lawyer has obtained the informed consent of

the client under the conditions of paragraph (b). See Rule 1.16. Where more than one client is involved, whether the lawyer may continue to represent any of the clients is determined both by the lawyer's ability to comply with duties owed to the former client and by the

lawyer's ability to represent adequately the remaining client or clients, given the lawyer's

duties to the former client. See Rule 1.9. See also Comments [5] and [29].

[5] Unforeseeable developments, such as changes in corporate and other organizational

affiliations or the addition or realignment of parties in litigation, might create conflicts in

the midst of a representation, as when a company sued by the lawyer on behalf of one client is bought by or merged with another client represented by the lawyer in an unrelated

matter. Depending on the circumstances, the lawyer may have the option to withdraw

from one of the representations in order to avoid the conflict. The lawyer must seek court

approval where necessary and take steps to minimize harm to the clients. See Rule 1.16.

The lawyer must continue to protect the confidences of the client from whose representation the lawyer has withdrawn. See Rule 1.9(c).

Identifying Conflicts of Interest: Directly Adverse

[6] Loyalty to a current client prohibits undertaking representation directly adverse to that

client without that client's informed consent. Thus, absent consent, a lawyer may not act

as an advocate in one matter against a person the lawyer represents in some other matter, even when the matters are wholly unrelated. The client as to whom the representation

is directly adverse is likely to feel betrayed, and the resulting damage to the client-lawyer

relationship is likely to impair the lawyer's ability to represent the client effectively. In addition, the client on whose behalf the adverse representation is undertaken reasonably may

fear that the lawyer will pursue that client's case less effectively out of deference to the

other client, i.e., that the representation may be materially limited by the lawyer's interest

in retaining the current client. Similarly, a directly adverse conflict may arise when a lawyer is required to cross-examine a client who appears as a witness in a lawsuit involving

another client, as when the testimony will be damaging to the client who is represented in

the lawsuit. On the other hand, simultaneous representation in unrelated matters of clients whose interests are only economically adverse, such as representation of competing

economic enterprises in unrelated litigation, does not ordinarily constitute a conflict of

interest and thus may not require consent of the respective clients.

[7] Directly adverse conflicts can also arise in transactional matters. For example, if a lawyer is asked to represent the seller of a business in negotiations with a buyer represented

by the lawyer, not in the same transaction but in another, unrelated matter, the lawyer

could not undertake the representation without the informed consent of each client.

Identifying Conflicts of Interest: Material Limitation

[8] Even where there is no direct adverseness, a conflict of interest exists if there is a significant risk that a lawyer's ability to consider, recommend or carry out an appropriate

course of action for the client will be materially limited as a result of the lawyer's other

responsibilities or interests. For example, a lawyer asked to represent several individuals

seeking to form a joint venture is likely to be materially limited in the lawyer's ability to

recommend or advocate all possible positions that each might take because of the lawyer's duty of loyalty to the others. The conflict in effect forecloses alternatives that would

otherwise be available to the client. The mere possibility of subsequent harm does not

itself require disclosure and consent. The critical questions are 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 on behalf of the client.

Lawyer's Responsibilities to Former Clients and Other Third Persons

[9] In addition to conflicts with other current clients, a lawyer's duties of loyalty and independence may be materially limited by responsibilities to former clients under Rule 1.9 or

by the lawyer's responsibilities to other persons, such as fiduciary duties arising from a

lawyer's service as a trustee, executor or corporate director.

Personal Interest Conflicts

[10] The lawyer's own interests should not be permitted to have an adverse effect on representation of a client. For example, if the probity of a lawyer's own conduct in a transaction is in serious question, it may be difficult or impossible for the lawyer to give a client

detached advice. Similarly, when a lawyer has discussions concerning possible employment with an opponent of the lawyer's client, or with a law firm representing the opponent,

such discussions could materially limit the lawyer's representation of the client. In addition, a lawyer may not allow related business interests to affect representation, for

example, by referring clients to an enterprise in which the lawyer has an undisclosed financial interest. See Rule 1.8 for specific Rules pertaining to a number of personal interest

conflicts, including business transactions with clients. See also Rule 1.10 (personal

interest conflicts under Rule 1.7 ordinarily are not imputed to other lawyers in a law firm).

[11] When lawyers representing different clients in the same matter or in substantially

related matters are closely related by blood or marriage, there may be a significant risk

that client confidences will be revealed and that the lawyer's family relationship will interfere with both loyalty and independent professional judgment. As a result, each client is

entitled to know of the existence and implications of the relationship between the lawyers

before the lawyer agrees to undertake the representation. Thus, a lawyer related to

another lawyer, e.g., as parent, child, sibling or spouse, ordinarily may not represent a client in a matter where that lawyer is representing another party, unless each client gives

informed consent. The disqualification arising from a close family relationship is personal

and ordinarily is not imputed to members of firms with whom the lawyers are associated.

See Rule 1.10.

[12] A lawyer is prohibited from engaging in sexual relationships with a client unless the

sexual relationship predates the formation of the client-lawyer relationship. See Rule 1.8

(j).

Interest of Person Paying for a Lawyer's Service

[13] A lawyer may be paid from a source other than the client, including a co-client, if the

client is informed of that fact and consents and the arrangement does not compromise the

lawyer's duty of loyalty or independent judgment to the client. See Rule 1.8(f). If accept-

ance of the payment from any other source presents a significant risk that the lawyer's representation of the client will be materially limited by the lawyer's own interest in

accommodating the person paying the lawyer's fee or by the lawyer's responsibilities to a

payer who is also a co-client, then the lawyer must comply with the requirements of paragraph (b) before accepting the representation, including determining whether the conflict

is consentable and, if so, that the client has adequate information about the material risks

of the representation.

Prohibited Representations

[14] Ordinarily, clients may consent to representation notwithstanding a conflict.

However, as indicated in paragraph (b), some conflicts are nonconsentable, meaning that

the lawyer involved cannot properly ask for such agreement or provide representation on

the basis of the client's consent. When the lawyer is representing more than one client,

the question of consentability must be resolved as to each client.

[15] Consentability is typically determined by considering whether the interests of the clients will be adequately protected if the clients are permitted to give their informed consent

to representation burdened by a conflict of interest. Thus, under paragraph (b)(1), representation is prohibited if in the circumstances the lawyer cannot reasonably conclude

that the lawyer will be able to provide competent and diligent representation. See Rule 1.1

(competence) and Rule 1.3 (diligence).

[16] Paragraph (b)(2) describes conflicts that are nonconsentable because the representation is prohibited by applicable law. For example, in some states substantive law

provides that the same lawyer may not represent more than one defendant in a capital

case, even with the consent of the clients, and under federal criminal statutes certain representations by a former government lawyer are prohibited, despite the informed consent

of the former client. In addition, decisional law in some states limits the ability of a governmental client, such as a municipality, to consent to a conflict of interest.

[17] Paragraph (b)(3) describes conflicts that are nonconsentable because of the insti-

tutional interest in vigorous development of each client's position when the clients are

aligned directly against each other in the same litigation or other proceeding before a

tribunal. Whether clients are aligned directly against each other within the meaning of this

paragraph requires examination of the context of the proceeding. Although this paragraph

does not preclude a lawyer's multiple representation of adverse parties to a mediation

(because mediation is not a proceeding before a “tribunal” under Rule 1.0(m)), such representation may be precluded by paragraph (b)(1).

Informed Consent

[18] Informed consent requires that each affected client be aware of the relevant circumstances and of the material and reasonably foreseeable ways that the conflict could

have adverse effects on the interests of that client. See Rule 1.0(e) (informed consent).

The information required depends on the nature of the conflict and the nature of the risks

involved. When representation of multiple clients in a single matter is undertaken, the

information must include the implications of the common representation, including possible effects on loyalty, confidentiality and the attorney-client privilege and the advantages and risks involved. See Comments [30] and [31] (effect of common representation

on confidentiality).

[19] Under some circumstances it may be impossible to make the disclosure necessary to

obtain consent. For example, when the lawyer represents different clients in related matters and one of the clients refuses to consent to the disclosure necessary to permit the

other client to make an informed decision, the lawyer cannot properly ask the latter to consent. In some cases the alternative to common representation can be that each party may

have to obtain separate representation with the possibility of incurring additional costs.

These costs, along with the benefits of securing separate representation, are factors that

may be considered by the affected client in determining whether common representation

is in the client's interests.

Consent Confirmed in Writing

[20] Paragraph (b) requires the lawyer to obtain the informed consent of the client, confirmed in writing. Such a writing may consist of a document executed by the client. In the

alternative, the lawyer shall promptly transmit a writing to the client confirming the client's

oral consent. See Rule 1.0(b). See also Rule 1.0(n) (writing includes electronic transmission). If it is not feasible to obtain or transmit the writing at the time the client gives

informed consent, then the lawyer must obtain or transmit it within a reasonable time

thereafter. See Rule 1.0(b). The requirement of a writing does not supplant the need in

most cases for the lawyer to talk with the client, to explain the risks and advantages, if

any, of representation burdened with a conflict of interest, as well as reasonably available

alternatives, and to afford the client a reasonable opportunity to consider the risks and

alternatives and to raise questions and concerns. Rather, the writing is required in order

to impress upon clients the seriousness of the decision the client is being asked to make

and to avoid disputes or ambiguities that might later occur in the absence of a writing.

Revoking Consent

[21] A client who has given consent to a conflict may revoke the consent and, like any

other client, may terminate the lawyer's representation at any time. Whether revoking consent to the client's own representation precludes the lawyer from continuing to represent

other clients depends on the circumstances, including the nature of the conflict, whether

the client revoked consent because of a material change in circumstances, the reasonable expectations of the other client and whether material detriment to the other clients

or the lawyer would result.

Consent to Future Conflict

[22] Whether a lawyer may properly request a client to waive conflicts that might arise in

the future is subject to the test of paragraph (b). The effectiveness of such waivers is generally determined by the extent to which the client reasonably understands the material

risks that the waiver entails. The more comprehensive the explanation of the types of

future representations that might arise and the actual and reasonably foreseeable

adverse consequences of those representations, the greater the likelihood that the client

will have the requisite understanding. Thus, if the client agrees to consent to a particular

type of conflict with which the client is already familiar, then the consent ordinarily will be

effective with regard to that type of conflict. If the consent is general and open-ended,

then the consent ordinarily will be ineffective, because it is not reasonably likely that the

client will have understood the material risks involved. On the other hand, if the client is

an experienced user of the legal services involved and is reasonably informed regarding

the risk that a conflict may arise, such consent is more likely to be effective, particularly if,

e.g., the client is independently represented by other counsel in giving consent and the

consent is limited to future conflicts unrelated to the subject of the representation. In any

case, advance consent cannot be effective if the circumstances that materialize in the

future are such as would make the conflict nonconsentable under paragraph (b).

Conflicts in Litigation

[23] Paragraph (b)(3) prohibits representation of opposing parties in the same litigation,

regardless of the clients' consent. On the other hand, simultaneous representation of

parties whose interests in litigation may conflict, such as coplaintiffs or codefendants, is

governed by paragraph (a)(2). A conflict may exist by reason of substantial discrepancy in

the parties' testimony, incompatibility in positions in relation to an opposing party or the

fact that there are substantially different possibilities of settlement of the claims or liab-

ilities in question. Such conflicts can arise in criminal cases as well as civil. The potential

for conflict of interest in representing multiple defendants in a criminal case is so grave

that ordinarily a lawyer should decline to represent more than one codefendant. On the

other hand, common representation of persons having similar interests in civil litigation is

proper if the requirements of paragraph (b) are met.

[24] Ordinarily a lawyer may take inconsistent legal positions in different tribunals at different times on behalf of different clients. The mere fact that advocating a legal position

on behalf of one client might create precedent adverse to the interests of a client represented by the lawyer in an unrelated matter does not create a conflict of interest. A conflict of interest exists, however, if there is a significant risk that a lawyer's action on behalf

of one client will materially limit the lawyer's effectiveness in representing another client in

a different case; for example, when a decision favoring one client will create a precedent

likely to seriously weaken the position taken on behalf of the other client. Factors relevant

in determining whether the clients need to be advised of the risk include: where the cases

are pending, whether the issue is substantive or procedural, the temporal relationship

between the matters, the significance of the issue to the immediate and long term

interests of the clients involved, and the clients' reasonable expectations in retaining the

lawyer. If there is significant risk of material limitation, then absent informed consent of

the affected clients, the lawyer must refuse one of the representations or withdraw from

one or both matters.

[25] When a lawyer represents or seeks to represent a class of plaintiffs or defendants in

a class-action lawsuit, unnamed members of the class are ordinarily not considered to be

clients of the lawyer for purposes of applying paragraph (a)(1) of this Rule. Thus, the lawyer does not typically need to get the consent of such a person before representing a client suing the person in an unrelated matter. Similarly, a lawyer seeking to represent an

opponent in a class action does not typically need the consent of an unnamed member of

the class whom the lawyer represents in an unrelated matter.

Nonlitigation Conflicts

[26] Conflicts of interest under paragraphs (a)(1) and (a)(2) arise in contexts other than litigation. For a discussion of directly adverse conflicts in transactional matters, see Comment [7]. Relevant factors in determining whether there is significant potential for material

limitation include the duration and intimacy of the lawyer's relationship with the client or clients involved, the functions being performed by the lawyer, the likelihood that dis-

agreements will arise and the likely prejudice to the client from the conflict. The question

is often one of proximity and degree. See Comment [8].

[27] For example, conflict questions may arise in estate planning and estate administration. A lawyer may be called upon to prepare wills for several family members, such

as husband and wife, and, depending upon the circumstances, a conflict of interest may

be present. In estate administration the identity of the client may be unclear under the law

of a particular jurisdiction. Under one view, the client is the fiduciary; under another view

the client is the estate or trust, including its beneficiaries. In order to comply with conflict

of interest rules, the lawyer should make clear the lawyer's relationship to the parties

involved.

[28] Whether a conflict is consentable depends on the circumstances. For example, a lawyer may not represent multiple parties to a negotiation whose interests are fundamentally

antagonistic to each other, but common representation is permissible where the clients

are generally aligned in interest even though there is some difference in interest among

them. Thus, a lawyer may seek to establish or adjust a relationship between clients on an

amicable and mutually advantageous basis; for example, in helping to organize a business in which two or more clients are entrepreneurs, working out the financial reor-

ganization of an enterprise in which two or more clients have an interest or arranging a

property distribution in settlement of an estate. The lawyer seeks to resolve potentially

adverse interests by developing the parties' mutual interests. Otherwise, each party might

have to obtain separate representation, with the possibility of incurring additional cost,

complication or even litigation. Given these and other relevant factors, the clients may

prefer that the lawyer act for all of them.

Special Considerations in Common Representation

[29] In considering whether to represent multiple clients in the same matter, a lawyer

should be mindful that if the common representation fails because the potentially adverse

interests cannot be reconciled, the result can be additional cost, embarrassment and

recrimination. Ordinarily, the lawyer will be forced to withdraw from representing all of the

clients if the common representation fails. In some situations, the risk of failure is so great

that multiple representation is plainly impossible. For example, a lawyer cannot undertake

common representation of clients where contentious litigation or negotiations between

them are imminent or contemplated. Moreover, because the lawyer is required to be

impartial between commonly represented clients, representation of multiple clients is

improper when it is unlikely that impartiality can be maintained. Generally, if the relationship between the parties has already assumed antagonism, the possibility that the clients' interests can be adequately served by common representation is not very good.

Other relevant factors are whether the lawyer subsequently will represent both parties on

a continuing basis and whether the situation involves creating or terminating a relationship between the parties.

[30] A particularly important factor in determining the appropriateness of common representation is the effect on client-lawyer confidentiality and the attorney-client privilege.

With regard to the attorney-client privilege, the prevailing rule is that, as between commonly represented clients, the privilege does not attach. Hence, it must be assumed that

if litigation eventuates between the clients, the privilege will not protect any such communications, and the clients should be so advised.

[31] As to the duty of confidentiality, continued common representation will almost cer-

tainly be inadequate if one client asks the lawyer not to disclose to the other client information relevant to the common representation. This is so because the lawyer has an equal

duty of loyalty to each client, and each client has the right to be informed of anything bear-

ing on the representation that might affect that client's interests and the right to expect

that the lawyer will use that information to that client's benefit. See Rule 1.4. The lawyer

should, at the outset of the common representation and as part of the process of obtaining each client's informed consent, advise each client that information will be shared and

that the lawyer may have to withdraw from representing one or more or all of the common

clients if one client decides that some matter material to the representation should be kept

from the others. In limited circumstances, it may be appropriate for the lawyer to proceed

with the representation when the clients have agreed, after being properly informed, that

the lawyer will keep certain information confidential. For example, the lawyer may reasonably conclude that failure to disclose one client's trade secrets to another client will not

adversely affect representation involving a joint venture between the clients and agree to

keep that information confidential with the informed consent of both clients.

[32] When seeking to establish or adjust a relationship between clients, the lawyer should

make clear that the lawyer's role is not that of partisanship normally expected in other circumstances and, thus, that the clients may be required to assume greater responsibility

for decisions than when each client is separately represented. Any limitations on the

scope of the representation made necessary as a result of the common representation

should be fully explained to the clients at the outset of the representation. See Rule 1.2(c)

and 2.2

[33] Subject to the above limitations, each client in the common representation has the

right to loyal and diligent representation and the protection of Rule 1.9 concerning the

obligations to a former client. The client also has the right to discharge the lawyer as

stated in Rule 1.16.

Organizational Clients

[34] A lawyer who represents a corporation or other organization does not, by virtue of

that representation, necessarily represent any constituent or affiliated organization, such

as a parent or subsidiary. See Rule 1.13(a). Thus, the lawyer for an organization is not

barred from accepting representation adverse to an affiliate in an unrelated matter, unless

the circumstances are such that the affiliate should also be considered a client of the lawyer, there is an understanding between the lawyer and the organizational client that the

lawyer will avoid representation adverse to the client's affiliates, or the lawyer's obligations to either the organizational client or the new client are likely to limit materially the

lawyer's representation of the other client.

[35] A lawyer for a corporation or other organization who is also a member of its board of

directors should determine whether the responsibilities of the two roles may conflict. The

lawyer may be called on to advise the corporation in matters involving actions of the directors. Consideration should be given to the frequency with which such situations may

arise, the potential intensity of the conflict, the effect of the lawyer's resignation from the

board and the possibility of the corporation's obtaining legal advice from another lawyer in

such situations. If there is material risk that the dual role will compromise the lawyer's

independence of professional judgment, the lawyer should not serve as a director or

should cease to act as the corporation's lawyer when conflicts of interest arise. The lawyer should advise the other members of the board that in some circumstances matters dis-

cussed at board meetings while the lawyer is present in the capacity of director might not

be protected by the attorney-client privilege and that conflict of interest considerations

might require the lawyer's recusal as a director or might require the lawyer and the lawyer's firm to decline representation of the corporation in a matter.