Happy Halloween and welcome to this “scary” JACPA Ethics Alert. This Alert will discuss an Illinois appeals court case that addresses the scary area of conflicts of interest in family law cases. In an October 14, 2011 opinion, an Illinois appellate court affirmed the trail court which found that a law firm which represented the wife in a divorce after initially consulting with the husband had a conflict of interest which voided its fee agreement with the wife from the outset and; therefore, the law firm forfeited all fees. The case is: In re Marriage of Newton, Ill. App. Ct. 1st Dist., No. 1-09-0683, 6/30/11 (published 10/14/11).
David Newton filed a motion to disqualify attorney David J. Grund and the law firm Grund & Leavitt from representing his wife Hadley Newton in their divorce action in 2007. After hearings, the trial court subsequently disqualified the lawyer and the law firm, concluding that Grund had previously represented Mr. Newton in the same matter. According to the court’s order, Mr. Newton had met the lawyer at his law office for one or two hours and discussed his impending divorce, children, and financial situation.
The lawyer testified that he told Mr. Newton at the meeting that the representation would not begin unless he actually signed a contract; that no attorney-client privilege would attach during their meeting; and that Newton should not disclose anything to him that could not appear in the public record. The lawyer also testified that he did not believe that Mr. Newton would actually hire him, that he couldn’t recall anything that Mr. Newton told him, and that he didn’t take any notes. The lawyer subsequently was retained by Ms. Newton and represented her in the divorce proceedings. She testified that when she approached the lawyer, he told her there was a conflict of interest but that he agreed to represent her despite the conflict and she later executed a fee agreement.
After hearing the evidence, the trial court concluded that both of the Newtons were credible and that Mr. Newton’s meeting with the lawyer created an attorney-client relationship that disqualified the firm from representing Hadley Newton in the divorce. The court further found that the representation of Ms. Newton violated Illinois Rule of Professional Conduct 1.9(a) which addresses conflicts of interest involving former clients; therefore, the law firm was disqualified and prohibited from collecting any fees for the services it had previously provided since the retainer agreement for Ms. Newton was void and unenforceable from its inception. The law firm then appealed.
The Illinois appellate opinion held that the trial court correctly ruled that the law firm should be disqualified for violating Rule 1.9, particularly since both of the Newtons’ interests were so obviously in conflict. The opinion noted that Illinois Rule 1.9(a) (which is substantially similar to Rule 4-1.9(a), Rules Regulating The Florida Bar) clearly states that a lawyer who has represented a client in a matter shall not take on a client in the same or a substantially related matter if the new client’s interests are materially adverse to those of the former client, unless the former client consents.
The opinion further found that, notwithstanding the lawyer’s disclaimers, Mr. Newton’s consultation with lawyer created an attorney-client relationship since he was seeking advice about his impending divorce. Further, since the Newtons were adverse parties in the same case, there was clearly a substantial relationship between the two representations and, as a result of the lawyer’s meeting with Mr. Newton, an irrebuttable presumption was created that Mr. Newton shared confidential information with the lawyer and was sufficient grounds for the disqualification.
The appellate opinion also rejected the argument that the law firm was entitled to be paid for the services the firm provided before it was disqualified since the retainer agreement was void ab initio and unenforceable due to the conflict for reasons of public policy for the following reasons:
1) as a result of the Illinois Rule 1.9 violation, the law firm’s fee agreement with Ms. Newton was not a “contract which meets applicable requirements of court rules” as required by the Illinois Marriage and Dissolution of Marriage Act.
2) the fee contract was void and unenforceable from its inception since it violated Illinois public policy which is set forth in Rule 1.9. Further, case precedent indicated that attorneys’ fees should not be allowed if a lawyer is disqualified due to conflict of interest.
The court also rejected the law firm’s alternative argument that it was entitled to the fees since it acted in good faith since “purported good faith is irrelevant”.
Finally, the court also upheld a contempt order issued by the trial court against the lawyer for failing to step away from the bench when ordered to do so because the failure could not be justified as a good faith effort to secure “clarification of an uncertainty” since Rule 1.9 makes it abundantly clear that representing clients with conflicting interests is prohibited, the court said.
Bottom line: As I have said many times, the practice of family law is fraught with potential peril with regard to potential (or actual) conflicts of interest and other issues. In this case, the lawyer apparently thought he could make a blatant conflict go away by saying that there was no conflict. As side note, current (and fairly recent) Florida Bar Rule 4-1.18 addresses the issue of conflict when one party attempts to consult with the lawyer and the lawyer (or law firm) declines the representation and is approached by the opposing party for representation.
…be very careful out there!
As always, if you have any questions about this Ethics Alert or need assistance, analysis, and guidance regarding these or any other ethics, risk management, or other issues, please do not hesitate to contact me.
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