ACC endorses the revised conflict of interest rule proposed by the State Bar of California.
The Association of Corporate Counsel (ACC), a global legal association representing more than 40,000 in-house counsel employed by over 10,000 organizations in 85 countries, endorses the revised conflict of interest rule proposed by the State Bar of California. The proposed rule preserves California’s client-centric approach to the enforceability of advanced conflict waivers.
Joined by nearly 5,500 in-house counsel members based in California, ACC submitted the comment letter last week to the State Bar of California. In the letter, ACC addresses the position that corporate counsel have to select a firm and trust in outside counsel’s disclosure of potential conflicts. The comment letter also outlines the position of in-house counsel as a client responsible for negotiating terms regarding conflicts of interest. ACC also emphasized the impact on client-law firm relationships when the scope of waivers is unclear, citing the Sheppard Mullin Richter & Hampton LLP v. J-M Manufacturing Co. Inc. case, which ruled unanimously on the firm’s forfeiture of fees due to a conflict non-disclosure of a whistleblower suit.
“We applaud California for continuing a realistic approach to handling advanced conflict waivers and respecting all clients’ rights to fully informed consent to conflicts of interest,” said Amar Sarwal, vice president and chief legal strategist for ACC. “By rejecting the ABA standard that allows broad, open-ended advance conflict waivers, California is upholding the duties of loyalty and independent judgment that lawyers owe all clients – even sophisticated ones.”
The ACC letter addresses Comment 8 to proposed Rule 1.7 of the State Bar of California’s Rules of Professional Conduct, which, unlike the comments to ABA Model Rule 1.7, does not support the enforceability of broad, open-ended advanced conflict waivers against sophisticated clients. In addition, ACC highlights its support of aligning rules of professional conduct with the ABA Model Rules, with deliberate exception on advanced conflict waivers. ACC further notes that, “allowing open-ended advance conflict waivers to be enforced against sophisticated clients is steadily eroding [lawyers’] duties of loyalty and independent judgment.”
Submitted by the Commission of Revision of the Rules of Conduct, the proposed amendment is under review by the Board of Trustees of the California Supreme Court. For developments on this issue, please visit advocacy.acc.com.