More Isn't Always Better: Representing Opposite Interests

The question often arises concerning whether lawyers can effectively and ethically represent opposite types of clients — for example, insurance carriers and insurance coverage plaintiffs.

American Bar Association Rule of Professional Conduct 1.7 says, on one hand, that a lawyer cannot serve two parties that are directly adverse in the same matter; it also bars representation "when 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."

Yet Rule 1.7 also states that a lawyer may represent clients whose interests are opposite if the lawyer is "able to provide competent and diligent representation to each affected client."

Because that stipulation opens the door to representing opposite types of clients, the consideration for the attorney becomes a practical one.

In the analogy above, would an insurance carrier get upset if it knew that its coverage defense lawyer was also representing plaintiffs in coverage matters against other carriers? If so, the plaintiffs' business may not be worth it.

However, a plaintiffs' attorney might find substantial advantages to undertaking defense work. Such work could even out cash flow and keep the lawyer from being dependent on one type of client.

The example at Heller Ehrman, which failed several years ago, is instructive. The firm primarily handled litigation defense, and when a number of large cases suddenly settled, there was no new business in the pipeline to replace it.

There is also the consideration of whether certain types of work in opposition will create financial problems for the firm. Plaintiffs' cases are often taken on a contingency basis, for example, while defense work is typically done at an hourly rate.

Corporate defense firms that enter into contingency arrangements have found that they face increased problems from their use. Some of these problems crop up while the contingency matter is open and there must be compensation for lawyers who bring no money into the firm, and, in fact, are responsible for cash outflow in the form of their compensation and expenses advanced to sustain the lawsuit.

If the firm is successful and the contingency money flows in, conflicts can arise over who gets what. How much should the lawyers working on the matter receive? Isn't the matter the "property" of the firm? Didn't the firm, not the lawyers, advance the costs? What is fair?

Such issues show that any decision to take on clients from opposing perspectives should be carefully considered. Firms that consider all business to be good business without regard to thinking through the consequences might find that taking fees from opposing sides creates more problems than it's worth.

A better alternative is to diversify firm practice to encompass several different but somehow related areas of emphasis.

A personal injury lawyer, whether serving plaintiffs or insurers, might consider diversifying into such areas as construction law or representing architects or realtors in professional services disputes. The techniques of discovery and trial advocacy would be the same, the firm's business base would be diversified, and conflicts of interest would not be a problem.

For the issue is not just about more business — it's getting the right business as a better foundation for firm profitability.