Attorney S represents Client T in a shareholder derivative suit against the directors of Company U. Attorney S's spouse, who is not an attorney, owns a significant number of shares in Company U and stands to benefit financially if Client T's lawsuit is successful. Attorney S is aware of her spouse's financial interest. What is Attorney S's ethical obligation?
- AAttorney S can continue representation as long as she does not discuss the case with her spouse.
- BAttorney S must withdraw from the representation immediately.
- CAttorney S is not required to disclose the interest because her spouse is not a client and is not an attorney.
- DAttorney S must disclose her spouse's financial interest to Client T and obtain Client T's informed consent, confirmed in writing.
Show answer & explanationAnswer & explanation
Correct answer: D. Attorney S must disclose her spouse's financial interest to Client T and obtain Client T's informed consent, confirmed in writing.
This scenario presents a material limitation conflict of interest under Rule 1.7(a)(2), where Attorney S's representation of Client T may be materially limited by Attorney S's own personal interest (the financial benefit to her spouse, which implicitly benefits her). While the spouse is not a client, the financial interest is significant enough to create a risk that Attorney S's professional judgment could be affected. This type of conflict is generally waivable if Attorney S reasonably believes she can provide competent and diligent representation and obtains Client T's informed consent, confirmed in writing.
Why the other options are wrong
- A. While not discussing the case with the spouse is good practice for confidentiality, it does not resolve the underlying conflict of interest stemming from the spouse's financial stake.
- B. Withdrawal is too absolute; this type of conflict is often waivable.
- C. The rules extend to interests of close family members, especially when they create a significant personal interest for the lawyer that could affect independent judgment.
Lawyer's Personal Interest (Family Member's Financial Stake)
A conflict of interest arises when a lawyer's representation of a client may be materially limited by the lawyer's own personal interests, including significant financial interests of a close family member that could influence the lawyer's professional judgment.
- Personal interest conflicts include those of close family.
- A significant financial stake can materially limit judgment.
- Requires disclosure and informed consent (written).
- Attorney must reasonably believe competent representation is possible.
Memory trick: Spousal Stocks Stir Subtle Struggles, Seeking Client's Clear Consent.