Rule Five: Conflicts of Interest (Duty of Loyalty)

(a) A paralegal shall not undertake to provide any services for a lawyer's client when the paralegal's personal or business interests may reasonably affect the interests of another client, unless the client has consented after full disclosure, and the supervising lawyer reasonably believes that the work will not adversely affect the paralegal's relationship with the other client.

(1) A paralegal shall avoid entering into business transactions with a lawyer's client unless full disclosure has been made to both the client and the supervising attorney;

(2) A paralegal shall not acquire literary, publication or media rights related to a client's representation during the course of the representation;

(3) A paralegal shall not advance or guarantee financial assistance to a lawyer's client;

(4) A paralegal shall not enter into an agreement with a lawyer's client purporting to limit the client's rights to file a complaint against the paralegal or the lawyer by whom the paralegal is supervised.

(5) A paralegal shall avoid conflicts of interest that arise from family relationships.

(b) The paralegal shall not undertake to provide services to a lawyer's client and thereafter undertake to provide services to 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 consents after full disclosure.

(c) A paralegal shall create and maintain records to identify clients, parties and matters to determine whether a conflict exists or may arise.

(d) A paralegal shall not participate in any matter where a conflict of interest has been identified by the supervising attorney.

Commentary

Rules concerning conflicts of interest are designed to protect the client's interest. The foundation for conflicts of interest rules is the legal professional's responsibility to maintain client confidence and the legal professional's duty of loyalty to client interests.

While conflicts of interest can arise in a variety of settings, conflict of interest problems involving the paralegal most notably arise in the context of the former client. The consequences of a former client conflict involving the paralegal can prove devastating for both the client and the law firm. Most significantly, the law firm by which the paralegal is employed may be disqualified from representing the client.

The most highly publicized of such cases occurred in California and is documented in In re Complex Asbestos Litigation (1991), 232 Cal. App. 3d 572, 283 Cal. Rptr. 732. In this case, a solo practitioner was disqualified from representing several clients, plaintiffs in asbestos litigation, because the attorney had hired a paralegal previously employed by the firm representing the defendants in the same litigation. In reaching its holding, the court explained, "hiring a former employee of opposing counsel is not, in and of itself, sufficient to warrant disqualification of an attorney or law firm. However, when the former employee possesses confidential attorney-client information, materially related to pending litigation, the situation implicates ... considerations of ethics which run to the very integrity of our judicial process." Complex Asbestos, 232 Cal. App. 3d at, 283 Cal. Rptr. at 744.

Therefore, because the consequences of a conflict can be so great, the paralegal must maintain a record-keeping system that tracks potential situations involving conflicts of interest. When a potential problem presents itself, the paralegal should advise the supervising attorney. Disqualification of the law firm may be avoided when proper procedures are in place that protect the confidentiality and loyalty owed to the client. See e.g., Chicago Bar Association Committee on Professional Responsibility opinion 93-5 (May 1994).

Other kinds of conflict of interest problems involving the paralegal's personal or business interests might also arise, but may be cured where, upon being notified of the potential conflict, the client consents and the supervising attorney reasonably believes that the work will not adversely affect the paralegal's relationship with the client. Therefore, the paralegal should do such things as entering into a business transaction with a client only with caution. Perhaps the best course of action to follow is to avoid the possibility of a future conflict altogether.

Conflict of interest rules are of special significance for the freelance paralegal. The freelance paralegal works for a number of attorneys, associated with different law firms, who represent different clients. Often, freelance paralegals find themselves doing a great deal of work in a particular area of law because they have developed a certain expertise. Therefore, the very nature of the freelance paralegal's work means that the prospect of a former client conflict arising is great. The freelance paralegal must take additional measures to avoid a conflict.