Ethics Opinions
Iowa Supreme Court Board of Professional Ethics and Conduct
Date of Opinion:
11/06/2006
Opinion Number:
06-03
Title:
Bond Counsel Representation
Opinion:
The Committee has been asked by members of the Iowa Bar who practice in the area of bonding to reconsider Iowa Rule of Professional Conduct 32:1.7 and its comments in relation to its earlier Formal Ethics Opinion 95-20 (February 22, 1996) (Conflict: Bond Counsel), which addresses the subject of a lawyer
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s representation of an issuer as bond counsel in a negotiated issuer debt financing with an underwriter, when other lawyers in the law firm represent or have represented the same underwriter in other unrelated financing or legal matters.
Effective July 1, 2005 the Iowa Supreme Court officially adopted the Iowa Rules of Professional Conduct, and, under Rule 32:1.7 (Conflicts of Interest: Current Clients), a lawyer is permitted to obtain effective informed consent to a wider range of future conflicts than would have been possible before 2005 under Iowa
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s prior version of the Iowa Code of Professional Responsibility. Because of these changes, the Committee modifies Formal Ethics Opinion 95-20 (Conflict: Bond Counsel), which concluded that
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it would be improper for an Iowa law firm to represent an issuer as bond counsel in a negotiated issuer debt financing with an underwriter if another lawyer in the firm is currently representing the same underwriter in other, unrelated financing or legal matters.
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As detailed below, pursuant to Rule 32:1.7(b) and Comment [22], the Committee believes that the representation by a lawyer of an issuer as bond counsel in a negotiated issuer debt financing with an underwriter, when the lawyer and/or other lawyers in the law firm represent or have represented the same underwriter in other unrelated financing or legal matters, is a conflict which may be consented to upon proper written disclosure in the situation where all parties are sophisticated and experienced users of the legal services involved.
Rule 32:1.7 addresses concurrent conflicts of interest and the circumstances in which a lawyer may represent a client notwithstanding a concurrent conflict with the informed consent of each affected client. Rule 32:1.7(a) defines a
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concurrent conflict of interest,
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and Rule 32:1.7(b) sets forth the circumstances under which a lawyer may undertake representation or continue representation of a client that has given informed consent to a conflict. Rule 32:1.7(b) states:
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 competent 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.
Comment [22] also addresses the subject of a client
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s giving informed consent to future conflicts,
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...if the client is an experienced user of the legal services involved and is reasonably informed regarding the risk that a conflict may arise, such consent is more likely to be effective, particularly if, e.g., the client is independently represented by other counsel in giving consent and the consent is limited to future conflicts unrelated to the subject of the representation. ...
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Therefore, pursuant to Rule 32:1.7(b) and Comment [22], the Committee believes that where the parties are sophisticated and experienced users of the legal services involved in representation by a lawyer of an issuer as bond counsel in a negotiated issuer debt financing with an underwriter, when the lawyer and/or other lawyers in the law firm represent or have represented the same underwriter in other unrelated financing or legal matters, is a conflict which may be consented to upon proper disclosure. Where typically, the issuers and underwriters in a negotiated issuer debt financing transaction are experienced consumers of legal services, and particularly when they are represented by independent counsel in giving consent, the Committee believes that the advice presented in Formal Ethics Opinion 95-20 (Conflict: Bond Counsel) against allowing consent to such representation under any circumstances is not supported by Iowa
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s recent adoption of the Iowa Rules of Professional Conduct, effective as of July 1, 2005, and that, accordingly, Formal Ethics Opinion 95-20 is modified in accordance herewith.
For the Committee,
NICK CRITELLI,
Chairman
Committee on Professional Ethics and Standards
Iowa State Bar Association