Current Client Conflicts Triggered by Fraud Claims: Can They Be Waived?

13 Min Read By: Hope A. Comisky

The general rule that lawyers may not accept engagements on behalf of clients that involve conflicts of interest is widely settled. The rule is designed to “assure clients that [a] lawyer’s work will be characterized by loyalty, vigor and confidentiality.”[1] Although clients affected by a conflict of interest can, under certain circumstances, consent to representation where a conflict is present, some conflicts of interest are deemed “nonconsentable.”[2] For example, when clients are aligned directly against each other in the same litigation, the institutional interest in the vigorous development of each client’s position renders the conflict nonconsentable.[3]

American Bar Association (“ABA”) Model Rule of Professional Conduct (“MRPC”) 1.7 provides that a lawyer cannot represent one client in a matter adverse to another unless the lawyer believes that the representation would not adversely affect the relationship with the other client and with both clients in the individual engagements.

Can that standard be met when the underlying cause of action being asserted against the other client is fraud?

A Brief History: Pre-2002 MRPC 1.7, Comment [8]

Before 2002, comment [8] to MRPC 1.7 provided some specificity about the circumstances under which lawyers may—or may not—accept an engagement in which they would advocate in favor of one client against another current client. It stated:

Ordinarily, a lawyer may not act as advocate against a client the lawyer represents in some other matter, even if the other matter is wholly unrelated. However, there are circumstances in which a lawyer may act as advocate against a client. . . . The propriety of concurrent representation can depend on the nature of the litigation. For example, a suit charging fraud entails conflict to a degree not involved in a suit for declaratory judgment concerning statutory interpretation.[4]

Thus, prior to 2002, under the Model Rules and in those states that had adopted the Model Rules, it generally was considered a disqualifying—or nonwaivable—conflict for an attorney to represent a client in litigation that involved claims of fraud against another current client, even if the two engagements were wholly unrelated to each other.

Accordingly, at that time, courts faced with disqualification motions sometimes considered the nature of the action in determining whether a conflict was “waivable.” Those courts reasoned that the nature of certain types of claims, like fraud claims, necessarily attacked the character of the individual or company and, therefore, made it nearly impossible for an attorney to maintain his or her duty of loyalty to his/her client while asserting such a claim against that client. How, those courts questioned, could an attorney adequately represent the interests of the client in one action while attacking that client’s character on behalf of another client in a separate action?

As one example, in Fisons Corp. v. Atochem North America, Inc., Dechert Price & Rhoads (“Dechert”) served as counsel to Pennwalt Corporation (“Pennwalt”) in connection with trademark disputes and, particularly, the sale of its pharmaceutical group to Fisons Corporation (“Transaction”).[5] With Pennwalt’s consent, Fisons retained Dechert at the same time to serve as Fisons’s counsel in connection with a trademark dispute concerning two products, Allerest and Alleract. Pennwalt’s consent allowing Dechert to handle the trademark dispute was conditioned on Fisons’s agreement that Dechert could represent Pennwalt in any subsequent litigation between Pennwalt and Fisons relating to the Transaction. A dispute relating to the Transaction arose in which Fisons claimed that Pennwalt/Atochem made fraudulent representations. Dechert entered its appearance for Pennwalt’s successor, Atochem North America, Inc., in the ensuing litigation. Notwithstanding the prior consent, Fisons moved to disqualify Dechert, arguing, in part, that the nature of the litigation precluded consent to the conflict of interest.

The court analyzed the matter utilizing the applicable provisions of the governing New York Code of Professional Responsibility. The relevant provision was Disciplinary Rule (“DR”) 5-105, which stated in pertinent part that “a lawyer may represent multiple clients if it is obvious that he can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each.”[6]

Although the wording of MRPC 1.7 was different, the court looked to it for guidance and found comment [8] of MRPC 1.7 particularly instructive.[7] The court noted its agreement with the proposition that waivers cannot be secured as to certain causes of action, particularly a fraud claim:

[A] fraud cause of action generally implicates the defendant’s character. . . . [W]hen an attorney asserts charges against his client that attack his client’s character, the attorney’s ability to adequately represent his client in the unrelated action is severely hindered. . . . [I]n this situation, the conflict of interest is heightened to such a degree that disqualification may be mandatory.[8]

However, the court refined its analysis by stating that this rule is designed to govern situations where the lawyer charges his/her own client with fraud. The court distinguished the case before it from the general rule because Dechert was not charging its own client, Fisons, with fraud. Rather, Dechert was defending a fraud claim—on behalf of one client, brought by another current client represented by other counsel.

Changes in 2002

In 2002, MRPC 1.7 was amended, along with its accompanying commentary, leaving open for debate the issue of whether a conflict triggered by a cause of action for fraud should be subject to consent. Based on recommendations by the American Bar Association Ethics 2000 Commission (“Commission”), the Model Rules were revised to set forth a clear standard for consentability of certain conflicts while specifically providing that some conflicts are not waivable, such as those “prohibited by law.” Comment [8], specifically the sentence about the effect of fraud claims on current client conflicts, was deleted. Although the reporter for the Commission published an Explanation of Changes, the only explanation offered for the changes was that the material is now addressed in comment [6].[9]

While it is true that the general principles embodied in former comment [8] are captured in comment [6], the suggestion that the specific nature of the claims should be considered when determining whether a particular conflict is waivable is notably absent. While making some minor wording changes, comment [6] added the following pertinent provisions to the prior commentary:

Loyalty to a current client prohibits undertaking representation directly adverse to that client without that client’s informed consent. Thus, absent consent, a lawyer may not act as an advocate in one matter against a person the lawyer represents in some other matter, even when the matters are wholly unrelated. The client as to whom the representation is directly adverse is likely to feel betrayed, and the resulting damage to the client-lawyer relationship is likely to impair the lawyer’s ability to represent the client effectively. In addition, the client on whose behalf the adverse representation is undertaken reasonably may fear that the lawyer will pursue that client’s case less effectively out of deference to the other client. . . . Similarly, a directly adverse conflict may arise when a lawyer is required to cross-examine a client who appears as a witness in a lawsuit involving another client, as when the testimony will be damaging to the client who is represented in the lawsuit. . . .[10]

The Commission did not reveal any substantive explanation for the decision to remove the specific sentence relating to fraud claims. And, notably, when the Commission wanted to prohibit representation where the conflict was too great—such as representing multiple defendants in a criminal matter—the commentary so states.[11]

This largely unexplained change in the commentary, coupled with the fact that few courts had expressly addressed this issue, resulted in a profound lack of clarity in this area of conflicts analysis. Notwithstanding the deliberate deletion of the reference to actions involving fraud claims, many professional responsibility counsel continued to advise their firms that current-client conflicts that require a law firm to assert a fraud-based claim on behalf of one client against another client are not waivable.

A recent case, SuperCooler Technologies, Inc. v. Coca-Cola Co., establishes that such advice is outdated. In the author’s view, this court got it right.

Fraud Claim Conflicts Waivable in SuperCooler Technologies, Inc. v. Coca-Cola Co.

In SuperCooler Technologies, the court denied a motion to disqualify the Paul Hastings law firm in a case where a claim of fraud in the inducement was being asserted by Paul Hastings’s lawyers against its client Coca-Cola.[12]

In 2021, Coca-Cola engaged Paul Hastings in connection with international human rights work. The engagement letter contained a broad advance waiver. Paul Hastings undertook additional work for Coca-Cola that was unrelated to the instant litigation. No new engagement letter was signed.

In March and early April 2023, the lawyers representing SuperCooler in the litigation between SuperCooler and Coca-Cola joined Paul Hastings. They notified Coca-Cola’s counsel of this change in law firm affiliations. Just a few days later, counsel for Coca-Cola notified Paul Hastings that it was not consenting to the law firm’s representation of SuperCooler against it in this matter and filed a motion on April 12, 2023, to disqualify the firm. 

Applying the applicable Florida Rules of Professional Conduct, which are analogous to the ABA Model Rules, the court had no problem concluding that Paul Hastings’s representation of SuperCooler was a conflict of interest under Florida Rule 4-1.7(a)—the interests of Coca-Cola were directly adverse to the interests of SuperCooler in this litigation. Although Coca-Cola argued that the rule violation was the end of the matter, the court continued its analysis under Florida Rule 4-1.7(b), which allows client consent to a representation involving a conflict of interest if the four-part test set forth there is met: the representation is not prohibited by law, the lawyer reasonably believes that the attorney can provide competent and diligent advice to both clients, the representation will not involve the lawyer asserting a position adverse to the other client, and both clients waive the conflict with informed consent. [13] (The ABA Model Rule is the same.)[14]

The court quoted at length from comment [22] to Rule 1.7 of the ABA Model Rules, which addresses the effectiveness of future waivers.[15] It also relied heavily on comment [6] to Model Rule 1.0, which explains and provides guidance for the term informed consent.[16] In concluding that Coca-Cola provided informed consent, the court engaged in a fact-sensitive analysis of Paul Hastings’s disclosure.

The engagement letter, the court noted, made clear that Paul Hastings was a large firm, which represented many other clients, including those in the same industry or a related industry, some of whom may have interests that are actually or potentially adverse to Coca-Cola in a wide variety of matters including, specifically, litigation.[17] The letter also stated that Paul Hastings could represent those clients in matters directly adverse to Coca-Cola.[18] The waiver did have a limitations clause. First, it stated that Paul Hastings would not represent another client in a matter adverse to Coca-Cola that was substantially related to the work Paul Hastings was doing for Coca-Cola.[19] Second, the new matter would not prejudice the firm’s effective representation of, and its discharge of its professional responsibilities to, Coca-Cola.[20] Third, the firm agreed to protect all confidential information and implement ethical walls as necessary.[21] Fourth, the law firm would obtain informed consent from the other client to waive potential and actual conflicts with respect to the firm’s work for Coca-Cola.[22] The letter also contained disclosures relating to potential risks, including that the firm could “be less zealous“ in representing Coca-Cola and could use confidential information of Coca-Cola in a manner adverse to its interests.[23] Finally, the letter suggested that Coca-Cola should seek the advice of independent counsel before agreeing to the waiver.[24]

The court specifically addressed the argument by Coca-Cola that the disclosure was inadequate because it did not explain that one of Paul Hastings’s other clients might sue Coca-Cola for fraud. The court agreed that allegations of fraud “lobbed by one client against another can influence whether an advanced waiver is effective informed consent.”[25] Yet, the court found that such allegations constituted just one factor to consider “in the overall informed consent analysis, not a per se prohibition by itself.”[26]

The court completed its analysis by analyzing whether the disclosure was reasonably adequate. The court noted that Coca-Cola was a sophisticated consumer of legal services.[27] Indeed, the evidence showed that in the last five years, it had retained more than fifty outside law firms, spending tens of millions of dollars.[28] Coca-Cola also was represented by independent counsel when it gave its consent to the conflict waiver in the engagement letter.[29] Given the circumstances, the court held that it was reasonably foreseeable for Coca-Cola to understand that Paul Hastings might appear as counsel against it in litigation and therefore waived the specific conflict in this case.[30]


The argument that fraud claims cannot be waived is principally supported by the personal nature of such matters. Yet, what could be more “personal” than family law proceedings where, in certain circumstances, one lawyer can represent both the husband and wife with informed consent?[31] Why should fraud claims be subject to a higher standard? Where there is no prohibition by applicable law, conflicts involving fraud claims should be subject to waiver.

The court evaluated all of the critical factors in reaching its conclusion that the advanced waiver was enforceable:

  • the sophistication of the client
  • the type of client (a large corporation)
  • the quality of the conflicts disclosure and its specificity
  • the nature of the claims giving rise to the conflict
  • the opportunity to secure independent counsel

These factors offer a well-tested set of criteria that can be used to structure a valid conflict waiver, supported by informed consent, where fraud claims against a current client are involved in a new engagement.

  1. Restatement (Third) of the Law Governing Lawyers § 122 cmt. (b) (Am. L. Inst. 2000).

  2. Model Rules of Pro. Conduct r. 1.7(b) (Am. Bar Ass’n 2020).

  3. Id. r. 1.7(b)(3), cmt. 28; Restatement (Third) of the Law Governing Lawyers § 122, cmt. (g)(i).

  4. Model Rules of Pro. Conduct r. 1.7 cmt. 8 (emphasis added).

  5. No. 90 Civ. 1080 (JMC), 1990 U.S. Dist. LEXIS 15284 (S.D.N.Y. Nov. 14, 1990).

  6. N.Y. Code of Pro. Resp. DR 5-105(C) (2007).

  7. Fisons, 1990 U.S. Dist. LEXIS 15284, at *22.

  8. Id. at *21–22.

  9. Ethics 2000 Comm’n, Model Rule 1.7: Reporter’s Explanation of Changes.

  10. Model Rules of Pro. Conduct r. 1.7 cmt. 6 (Am. Bar Ass’n 2002) (emphasis added).

  11. Id. r. 1.7 cmt. 23 (“The potential for conflict of interest in representing multiple defendants in a criminal case is so grave that ordinarily a lawyer should decline to represent more than one co-defendant.”).

  12. SuperCooler Techs., Inc. v. Coca-Cola Co., No. 6:23-cv-187- CEM-RMN, 2023 U.S. Dist. LEXIS 145316 (M.D. Fla. July 17, 2023).

  13. The commentary refers to several examples: representing more than one defendant in a capital case, certain representations by former government lawyers, and conflicts relating to certain municipalities that are precluded from granting conflict waivers. Model Rules of Pro. Conduct r. 1.7 cmt. 16. Notably absent from this prohibition is any reference to fraud claims.

  14. ABA Model Rule 1.7(b) provides as follows:

    Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if: (1) the lawyer reasonably believes that the lawyer will be able to provide confident and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and (4) each affected client gives informed consent, confirmed in writing. 

  15. SuperCooler Techs., 2023 U.S. Dist. LEXIS 145316, at *19.

  16. Id. at *20.

  17. Id. at *21–22.

  18. Id. at *22.

  19. Id.

  20. Id.

  21. Id.

  22. Id.

  23. Id.

  24. Id.

  25. Id. at *25.

  26. Id. at *26.

  27. Id.

  28. Id. at *27.

  29. Id.

  30. Id. at *28.

  31. Am. Coll. of Tr. & Est. Couns., The ACTEC Commentaries on the Model Rules of Professional Conduct 92 (4th ed. 2006) (commentary on Model Rule 1.7).

By: Hope A. Comisky


Connect with a global network of over 30,000 business law professionals


Login or Registration Required

You need to be logged in to complete that action.