The Ohio Rules of Professional Conduct should be amended to emphasize that disclosure and informed consent do not cure all conflicts of interest. The current rules allow conflicts of interest to be waived by providing full disclosure and obtaining informed consent. Likewise, the Supreme Court of Ohio’s opinions hold that attorneys can avoid sanctions by simply disclosing their conflicts of interest. But two arguments militate against disclosure as a cure-all. First, the underlying assumption that clients are capable of evaluating the disclosed risks and adjust their behavior accordingly is only warranted when clients are sophisticated. Second, empirical evidence suggests that disclosure may exacerbate the bias created by conflicts of interest.
The touchstone of the attorney-client relationship is the belief that the attorney represents the client’s interest and that this representation is not diluted by conflicting interests. The Rules prohibit attorneys from accepting or continuing representation if a conflict of interest exists. ((Ohio Prof. Cond. Rule 1.7(b) (2007).)) Rule 1.7(a) states a conflict of interest is created when
(1) the representation of that client will be directly adverse to another current client;
(2) there is a substantial risk that the lawyer’s ability to consider, recommend, or carry out an appropriate course of action for that client will be materially limited by the lawyer’s responsibilities to another client, a for a third person or by the lawyer’s own personal interests.
Rule 1.8(a) uses similar language to describe conflicts of interest that may arise between the client’s interest and the attorney’s own “ownership, possessory, security, or other pecuniary interest.” ((Ohio Prof. Cond. Rule 1.8(a) (2007).)) Rule 1.9(a) proscribes representation of a new client when “that person’s interests are materially adverse to the interests of the former client.” ((Ohio Prof. Cond. Rule 1.9(a) (2007).))
The rules detail some situations in which conflicts cannot be waived by the client. These conflicts are not distinguished by a single principle but are based on value judgments by the drafters. ((Jack A. Guttenberg and Lloyd B. Snyder, The Law of Professional Responsibility in Ohio, 1998. § 10.2.))
The comments to Rule 1.7 begin by asserting “[t]he principles of loyalty and independent judgment are fundamental to the attorney-client relationship and underlie the conflict of interests provisions of these rules.” These principles should guide and inform the drafting and interpretation of the rules governing conflicts of interest. But Rules 1.7, 1.8, and 1.9 each allow attorney’s to accept or continue representation despite a conflict of interests. If the conflict is fully disclosed and the affected client provides written informed consent. These exceptions are not consistent with the principles asserted in the comments. They undermine the principles by allowing clients, perhaps unwittingly, to waive the loyalty and independent judgment which they expect from an attorney.
Investing the client with the power to waive the conflict of interests is predicated on the assumption that the client “is capable of weighing the risk of the conflict against the value of the representation.” ((Id.)) But this assumption is likely unfounded except when attorneys are working with the most sophisticated and least vulnerable clients.
Consider Disciplinary Counsel v. Rafidi. ((Disciplinary Counsel v. Rafidi, 114 Ohio St. 3d 336 (Ohio 2007).)) An attorney agreed to represent two suspects in a drug cartel investigation. The attorney agreed to represent the first for a $200 flat fee. From this first client the attorney learned that a second suspect in the same matter also needed representation. The attorney offered his services to this second suspect, who agreed to a $20,000 retainer. This created an obvious conflict of interest: one suspect might choose to implicate the other.
Both clients made their decisions to hire the attorney while in police custody with no readily apparent alternatives.
The Supreme Court of Ohio suspended the attorney for six months based on this and other related ethical violations. The court stated the attorney “had an obligation under DR 5-105(A) ((The Supreme Court of Ohio Task Force on Rules of Professional Conduct indicates that Ohio Code of Professional Responsibility DR 5-105(A) was replaced by Ohio Rules ofprofessional Conduct Rule 1.7. http://www.sconet.state.oh.us/Atty-Svcs/ProfConduct/proposal/rule_updates_102805/appendix_c.pdf (last visited Dec. 7, 2007).)) to fully disclose to [his potential clients] his dual representation and to obtain the consent of both clients.” ((Rafidi, 114 Ohio St. 3d at 336.)) This holding indicates that the potential conflict of interest could have been cured by a disclosure.
To illustrate the effect of the conflict the Court noted the attorney focused his attention on the higher paying client. The original client had to call the attorney to find out that he was still a suspect.
The full disclosure may have saved the attorney’s disciplinary record but it is unlikely that disclosure would have changed the behavior of the clients or the attorney. It is unlikely that the disclosure would have compelled the attorney to call his $200 client any sooner. The Court’s opinion notes that the $200 client had previously retained the attorney for another unrelated matter and that the client contacted the attorney for advice in the criminal matter because “he was the only attorney [he] knew”. ((Id.)) This statement reveals that the $200 client was not a sophisticated client and that the full disclosure of the conflict would probably not have inspired the $200 client to seek alternative representation.
The findings of the Board of Commissioners on Grievances and Discipline suggest the second client was not in a position to properly evaluate the disclosed conflict or to seek alternative representation either. The Board noted that “persons who are incarcerated on criminal charges have restricted access to legal representation and are vulnerable to overreaching and improper solicitation”. ((Id. at 336, 338.)) The mere disclosure would not have assured either client of the “loyalty and independent judgment [that] are fundamental to the attorney-client relationship.” ((The Law of Professional Responsibility in Ohio, supra note 4.))
In Disciplinary Counsel v. Jacob ((Disciplinary Counsel v. Jacob, 109 Ohio St. 3d 252 (Ohio 2006).)) the Supreme Court of Ohio again implied that disclosure could cure a conflict of interest. In Jacob the attorney represented husband and wife clients. After the husband and wife separated, the attorney helped the husband remove the wife as a beneficiary from a trust and advised the husband to protect some of the husband’s assets from the wife. Subsequently, the attorney accepted representation of the wife. He removed the husband from her will. The attorney did not disclose to the wife his representation of her husband on similar matters. Consequently he did not secure informed consent. For this failure the Court sanctioned the offending attorney.
As in Rafidi the attorney could have saved his good name by disclosing the conflict but it is not clear the wife’s interests would have been any better served. Considering her existing relationship with the attorney, an attorney she trusted, the disclosure of the conflict may not have inspired the wife to seek alternative counsel.
Scholars expert in the effects of disclosure suggest that disclosure often has then effect of building trust instead of encouraging the client discount honesty an loyalty of the relationship. ((Daylian M. Cain, George Loewenstein, and Don A. Moore, The Dirt on Coming Clean: Perverse Effects of Disclosing Conflicts of Interest, 34 J. Legal Stud. 1, 6 (2005).)) The disclosure by the conflicted party is often viewed as an act of honesty. This act engenders trust and reduces the likelihood that biased advice will be appropriately discounted.
The Rafidi opinion illustrates this effect. The Court cited the attorney’s full disclosure of the offense to the Board as a mitigating factor. In other words the disclosure increased the attorney’s esteem in the eyes of the Court.
Besides engendering misplaced trust or esteem, disclosure may exacerbate the bias inherent to conflicts of interest. In a recent empirical study of the effects of conflicts of interest researchers concluded that disclosure benefited the disclosing party and harmed the party seeking advice. This conclusion was reached by testing three scenarios involving “advisors” and “estimators.” The advisors, analogous to attorneys, provided advice to the estimators, analogous to clients, regarding the value of a jar of money. The estimator was afforded only a glance at the jar, but the advisor had time to thoughtfully inspect the jar.
In the first scenario both the advisor and the estimator earned money based on the accuracy of the estimator’s estimate of he value of the money in the jar. The advisor was rewarded for giving helpful advice. The more accurate the estimate, the more money both parties earned. There was no conflict of interest in this scenario.
In the second scenario the estimator was compensated the same way but the advisor was rewarded for misleading the estimator. The less accurate the estimate, the more money the advisor received and the less the estimator received. In this scenario the estimator was not aware that the advisor had a conflict of interests. Not surprisingly the advisor’s advice was misleading and the estimator’s estimates were less accurate. In this scenario the estimators earned less money than they did in the first scenario.
In the third scenario the incentives remained the same as in the second, but in this scenario there was full disclosure. The estimator knew that the advisor had a conflict of interest; that the advisor had an incentive to mislead the estimator. Again not surprisingly the estimator received misleading information. But what is surprising and significantly undermines the belief that disclosure cures conflicts is that the estimators faired worse when the conflict was disclosed.
Based on a statistical analysis of the data the researcher offer two explanations. First, that it is difficult to properly discount advice tainted by a conflict of interests. This difficulty was not abated by repeated experiences. ((“the results provided no grounds for concluding that either experience with the task or feedback lessened the biasing effects of disclosure.” The Dirt on Coming Clean: Perverse Effects of Disclosing Conflicts of Interest, supra note 13.)) Second, that advisors were more willing to give self serving “advice” when the estimator was on notice of the conflict. The disclosure shifted responsibility from the advisor to the estimator.
In short the researchers found that estimators (clients) faired the best when there were no conflicts of interest and that they faired the worst when conflicts were disclosed. Advisors faired the best when their conflicts were disclosed.
This research combined with the holding by the Supreme Court of Ohio that disclosure can cure conflicts of interest shows that the Ohio Rules of Professional Conduct should be amended to reduce the questionable perception that disclosure can cure a conflict of interests. Attorneys have only their good name. Similarly, the profession has only its reputation. The Rules are one way that this reputation is upheld. By reducing reliance on disclosure to cure conflicts of interest the Rules can protect and enhance the reputation of the profession.
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