The Lawyer’s Conflict of Interest
Lawyer Kovač represented Company A in a contract dispute against Company B. After the case settled, Company B asked Kovač to represent it in a new matter against Company C. Kovač accepted, but did not inform Company A. During the new matter, Kovač used information about Company A’s business practices that he had learned in the prior representation. Company A discovered this and filed a complaint with the Croatian Bar Association. Kovač argues that the two matters are unrelated and that he owes no duty to a former client beyond confidentiality. The Bar’s Code of Ethics prohibits representing a new client whose interests are adverse to a former client in a substantially related matter, and prohibits using confidential information from the prior representation.
1. Did Kovač violate the conflict of interest rules? Analyse under the Croatian Bar Code of Ethics.
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Yes, Kovač violated the conflict of interest rules. Under the Croatian Bar Code of Ethics, a lawyer may not represent a new client if the new matter is substantially related to a prior representation and the new client’s interests are adverse to the former client. Here, Kovač used information about Company A’s business practices from the prior case. Even if the matters are not identical, the use of confidential information creates a substantial relationship. The duty to a former client continues after the termination of the representation. Kovač also failed to inform Company A and obtain consent. The fact that Company B was the opposing party in the first case makes the conflict more serious. The Bar Association should find a violation and may impose sanctions. Kovač’s argument that the matters are unrelated is undermined by his use of the information.
2. What sanctions could the Bar Association impose, and what should Kovač have done to avoid the conflict?
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The Bar Association may impose a warning, a reprimand, a fine, or in serious cases, suspend Kovač’s licence to practise. The sanctions depend on the gravity of the breach and any harm caused. To avoid the conflict, Kovač should have declined the new representation because it was adverse to a former client and involved confidential information. If he believed the matters were unrelated, he should have disclosed the prior representation to both Company A and Company B and obtained informed consent. He also should have screened himself from the information. Since he used the information, consent would not have been enough; he should have refused the engagement. The duty of loyalty and confidentiality continues after the representation ends. Kovač’s failure to inform Company A is itself a breach of the duty of candour.