I hate losing clients, or potential clients, because of conflicts, or perceived conflicts. Unfortunately, this happens more often than I would like (which is never), and more often than I think is really necessary. 

There are many different types of conflicts. Some are harder to get over than others. As a general proposition, lawyers cannot represent one client in a matter that is adverse to another client. Litigation is a good example of this. For example, as a general proposition, a lawyer can’t sue a client on behalf of another client. 

Another example is that a lawyer cannot represent client 1, if her knowledge of something confidential about client 2 would materially impair her ability to represent client 1. One example of this arises in the patent context. If a lawyer is asked to prosecute a patent for client 1, say a medical device for spine surgery, and she has knowledge of research being done by client 2 that impinges upon the patent application because she has been helping client 2 with its patents in the area, there may be no way that she can represent client 1 in this patent.

The things I have been describing are true ethical conflicts, the kinds of things bar association rules generally prohibit without some sort of knowing waiver.

But, there are other conflicts, business conflicts, which arise more often and cause more problems. 

Here are two that arise all the time in the course of my practice: First, representing investors and companies. By this I mean generally, not both in the same transaction. Second, representing companies that are actual or potential competitors. 

By the way, if our firm represents someone, for legal and ethical purposes, it is the same as if I represented that person, even if another attorney in the firm was doing the work and I knew nothing about it.

So, back to the first conflict. I can’t tell you how often I find myself talking to a prospective client and the question comes up, “Do you represent venture capitalists?” The answer, of course, is “yes.” Then sometimes, the conversation goes this way, “isn’t that a conflict, if I want you to represent me in a financing?” 

Well, no, unless I am proposing to represent both sides in the same transaction. What about if, from time to time, I (or my firm) represent a particular VC fund and that is the fund that is proposing to invest in my client? Now we are getting closer to a conflict and the bar association may require (or may not) a waiver from both clients.

But all that is in the realm of technical conflicts. The real conflict is that the potential client is thinking, how good is the advice going to be if he has a relationship with the investor is he really in my corner? This is the rub of it. If the client can’t get comfortable with the relationship, then it is a problem and I am not going to get the engagement.

BTW, some clients like the idea that their lawyers represent their financing sources from time to time. They view it as a relationship enhancement. Something along the lines of they have connections and can help me get financing. And, to some extent, this is true.

In the end, you have to go with your gut on this one.

With respect to the second conflict, it is just not unusual for a large firm (or even a medium sized firm) to have multiple clients in the same space. This can lead to conflicts, as in the patent example above. Again, if you want a lawyer with knowledge of your industry, you may have to accept that he or she my have clients that are, or could become, your competitors.

I suppose there are some cases where the business conflict, or potential business conflict, is of such a nature that the firm really should not be representing both parties. The patent example above is the obvious case, but I am sure there are others.

Having said that, most business conflicts are not that direct. Is representing a company that does BI and one that does data storage a conflict? It could be, but how direct is the conflict. Should the founders of either company care? Need to know the particulars. 

There can be significant benefits to having a lawyer who knows your industry. It is a little bit like asking if you would take an investment from a VC who has other investments in related spaces. You can easily imagine the benefits: they know the industry, have good contacts that can be reached on your behalf, they are most likely to be interested in your company, etc. 

Analogous issues arise with lawyers, but in cases where there is not a direct irreconcilable conflict, you have to go with your gut.