ABA Issues Formal Opinion on Conflicts Involving “Materially Adverse” Interests

On February 10, 2021, the American Bar Association released Formal Opinion 497 addressing conflicts involving representation of a current or prospective client with interests that are “materially adverse” to the interests of a former client on the same or substantially related matter. See ABA Formal Op. 497. ABA Model Rule of Professional Conduct 1.9(a) provides

 A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.

See ABA Model Rules of Pro’f Conduct, r. 1.9(a).

Rule 1.18(c) similarly addresses the interests of prospective clients. See ABA Model Rules of Pro’f Conduct 1.18(c) (“A lawyer subject to paragraph (b) shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in the matter, except as provided in paragraph (d).”

Neither Rule, however, specifies when one client’s interests are “materially adverse” to the interests of a former or prospective client. In issuing Formal Opinion 497, the Standing Committee on Ethics and Professional Responsibility opined that the following are types of situations where “material adverseness” may be found.

Suing or negotiating against a former client

Suring a formal client or defending a new client against a claim by a former client on the same or on a substantially related matter is a classic example of representing interests that are directly adverse and therefore “materially adverse” to the interests of a former client. Practically speaking, the lawyer should evaluate whether the lawyer is now on the opposite side of the “v” from his former client on a same or substantially similar matter.

In addition, Formal Opinion 497 notes that “being across the table, so to speak, from a former client and negotiating against that former client in transactional matters typically constitutes “material adverseness.” See ABA Formal Op. 497.

Attacking lawyer’s own prior work

A lawyer attacking the lawyer’s own prior work done for a former client on the same or a substantially related matter creates a materially adverse conflict. Formal Opinion 497 supplies two examples of materially adverse conflicts arising from a lawyer attacking their own prior work. First, a lawyer cannot challenge a patent that the lawyer previously obtained for a former client. Similarly, a lawyer may not challenge a real estate restrictive covenant for a new client that the lawyer previously drafted for the prior seller of the land.

A materially adverse conflict may still arise even when a lawyer is not directly attacking their own prior work but, rather, is seeking to undermine that work or the result achieved for a former client. In such a situation, Formal Opinion 497 makes clear that there is no bright line test. Rather, a close examination of the facts is required to determine whether the circumstances constitute material adverseness.

Examining a former client

A lawyer is prohibited from using information from a former client “to the disadvantage of the former client” under Rule 1.9(c)(1). As such, if a lawyer must use information relating to the former representation to the disadvantage of a former client to competently examine the former client, the lawyer has a conflict, unless that information has become “generally known.”

The opinion notes that a lawyer could avoid this conflict by having the current client retain another lawyer to examine the former client and screen the lawyer with the conflict from participating in such an examination of the former client.

Waiver of materially adverse conflicts

A lawyer may still undertake the representation despite the existence of a conflict due to materially adverse interests provided the lawyer adhere to the requirements set forth in the Rule of Professional Conduct. The opinion explains

If a reasonable lawyer reviewing the situation would conclude that the representation of a current client is “materially adverse” to a former client, the lawyer may still represent the current client, even if the current and prior matters are “substantially related,” provided the lawyer obtains the informed consent of the former client (or prospective client), to waive the potential conflict of interest and that consent is confirmed in writing.

See Formal Op. 497, p. 8.

Critically, informed consent to a conflict under Rule 1.9(a) will not waive the lawyer’s obligation to maintain the confidentiality of all information learned during the prior representation. For the lawyer to use or disclose client information protected by Rule 1.6, the client must also provide informed consent pursuant to Rule 1.6(a).

As to prospective clients, if a lawyer seeks to represent a current client in a matter that is materially adverse to a prior prospective client in the same or substantially related matter on which that prospective client consulted the lawyer, and the lawyer has received “significantly harmful” information from the prior prospective client, Rule 1.18(d)(1) permits representation of the current client if the current client and the prospective client give informed consent, confirmed in writing.  

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