Ethically Speaking: Spousal conflicts of interest ethics opinion, revisited

John E. Bernacki

In April 2011, I wrote about a spousal conflicts of interest ethics opinion where the issue was whether it was ethical for an attorney to refer clients with litigation-related financing needs  to a financial services firm formed by the lawyer’s spouse. In that case, the New York State Bar Association’s Committee on Professional Ethics concluded that it was not permissible to do so.

That case, Opinion 855 (3/14/11), was yet another example of the many inherent conflicts that can arise when an attorney does business with a spouse.

But what if both spouses are lawyers and their respective firms happen to represent clients on opposite sides of a case? Does this situation present a conflict that is prohibited by the New York State Rules of Professional Conduct?

The committee examined this very issue in Opinion 895 (12/6/11). Specifically, the committee was faced with determining whether a conflict existed between a sole practitioner representing a minor and her spouse’s law firm, a five-lawyer firm at which the spouse was the senior partner, where another attorney in the firm represented the opposing party.

Other information relevant to the committee’s inquiry included the fact that the sole practitioner practiced law from a home office in a small community and occasionally used both the conference room and telephone lines in her spouse’s law firm.

The first part of the committee’s inquiry was to determine whether a spousal conflict existed. The committee concluded that because “the sole practitioner’s spouse is not representing the opposing party, but rather another lawyer in the spouse’s five-lawyer firm” represents the party, Rule 1.10(h), the rule that prohibits spouses from representing opposing parties in a matter, did not apply.

The committee then turned to the issue of whether, pursuant to Rule 1.7(a)(2), a reasonable lawyer would conclude that there was “a ‘significant risk’ that the professional judgment of a lawyer in the inquirer’s position (i.e., married to the senior partner of the opposing law firm) would be ‘adversely affected by the [inquiring] lawyer’s financial, business, property or other personal interests.’”

According to the committee, factors to consider in making that determination include: 1) the size of the spouse’s firm, 2) the spouse’s position in the firm, 3) the possibility that the spouse would share in fees earned from the representation, and 4) the degree of the spouse’s involvement in the case.

Next, the committee applied those factors to the facts of the case at issue and concluded a conflict of interest did exist: “Here, the firm at which the inquirer’s spouse works has only five lawyers. The inquirer’s spouse is the senior partner in the firm, and therefore would presumably share in the fees generated in the matter in which the inquirer is adverse counsel.  Moreover, as the senior partner, the spouse may well have a supervisory role in the matter. Accordingly, a favorable result for the sole practitioner’s client would most likely be an unfavorable result for her spouse.  Thus, a conflict arises under Rule 1.7(a)(2). “

However, the committee explained that the conflict could be bypassed if the sole practitioner complied with Rule 1.7(b), which requires written informed client consent waiving the conflict.

The committee then declined to decide the issue of whether the minor could consent to the conflict and concluded that under the facts of the case, a conflict existed due to the nature of the relationship between the spouses and, furthermore, it was a conflict that could only be waived via informed written consent.

Thus, this case represents yet another example of the complexities involved when the business interests of an attorney collides with those of their spouse. This case also serves as yet another reminder that when it comes to issues of spousal conflict, what truly matters most is not the business interests of the attorney, but rather, the best interests of the client.

The Hon. John E. Bernacki is a Pittsford Town Court Justice. His law firm, John E. Bernacki Jr. PC, is located in Pittsford. He can be reached at www.johnbernackilaw.com.