Joint Representation: Keeping Both Clients Equally Informed

Joint Representation:

Keeping both clients equally informed

By Christina Weed

The Rules of Professional Conduct outline in detail an attorney’s duties in the context of lawyer-client relationship1. Lawyers are generally aware of their duties of loyalty, care, competence, etc., as well as what to do in cases of potential or actual conflict. Potential conflicts can arise very often in cases of representing two spouses, multiple business partners, etc.2

When representing married persons with their estate plan, or with their joint and several tax liabilities, potential conflicts should be addressed and explained, and of course adequate consents requested. However, what I often encounter if a tax matter comes to me at a time past the initiation of their case, I am often concerned to find that one of the spouses is often in the dark about what is transpiring in their case, and many times the spouse who is kept in the dark is the female in a marital relationship.

When it comes to tax liabilities, the more dominant spouse often wants to handle matters for the purported reason that they do not want to put additional stress on their partner. When it comes to matters of litigation, I often find that one spouse wants to be the one to handle things for similar reasons.

While it might be tempting to primarily deal with one spouse, probably the one who seems to have more information, is this the right method of representing both clients?

When it comes to estate planning, are both partners/spouses equally informed of what their documents indicate? Are both spouses adequately represented in the options presented to them and how their assets are depicted? In the context of estate planning, I find this usually is the case. However, when matters become litigious, or more adversarial in the case of tax controversy, I find that this is not always how the matter is handled.

I have had cases where a female spouse was represented by an attorney in Tax Court in conjunction with her spouse but not adequately kept in the loop. In one particular case, my client had moved to another state and was not receiving the pleadings that were filed in Tax Court that her attorney received. An adverse decision was obtained in Tax Court without her knowledge, so she was not able to appeal, or even appear. Later on, this affected her ability to obtain innocent spouse relief, since the matter had already been decided in Tax Court. The problem with dealing with only one spouse primarily is very clear in this case.

In some cases, a joint tax liability may not be fair to both spouses. Perhaps, one spouse has a separate business and has exclusive access to the financial information of the business and fails to file and/or timely pay taxes. The non-business-owner spouse has joint and several liability for jointly filed returns; however, in the event the spouses were to divorce, would the non-businessowner spouse possibly have a claim for innocent spouse relief? Is this ever discussed with the client who may have a valid claim for innocent spouse relief?

As an attorney, I understand the appeal of speaking primarily with the spouse/partner who understands our legal and financial vernacular better, but this is not the standard to which we are held accountable. It is our job to make sure we are explaining things to both of our clients so that they understand and can make good choices in connection with both of their legal interests3 .

When I have represented two clients with respect to a joint tax matter in the past, I often ask the partners/ spouses if it would make sense for the non-business-owner spouse to request innocent spouse relief, while the business-owner spouse pursues other ways to resolve their tax liability. Although this may seem like it is adverse to the partner/spouse not requesting innocent spouse relief, is it really if this is the course of action both spouses want to take? The IRS of course is less than thrilled when we take this approach, but I have had this handled favorably for both spouses/ partners in Tax Court in the past, and one spouse was ultimately granted relief.

Of course, at a point there becomes an actual conflict, because of divorce for example, I must withdraw from representing both spouses/partners, and this is disclosed to both partners at the beginning of representation as well.

In addition, even if one spouse wants to be the one to primarily communicate with me, I advise both clients at the beginning that I intend to copy both of them on all email communications. If this is not agreeable to both partners/spouses, it may be a signal that there is already an actual conflict.

I have seen this happen often in business litigation and other litigation as well. I know this comes up for my business partner in divorce many times where one spouse has been kept in the dark about finances throughout the entire marriage. While this would not be a case in which my business partner represents both sides, it demonstrates how incredibly common it is for one spouse to be kept in the dark throughout a marriage and not understand what is truly at stake when there is litigation, or even divorce or dissolution down the line. As I referenced above, while not always, the majority of the cases I have where this potential conflict is at issue, it is the female partner who is often kept in the dark. While this is not an access to justice issue in the conventional sense perhaps, it is very concerning that half of the population is often overlooked, or perhaps not adequately involved in their case, when it comes to their legal matters. As a woman and business owner, this is very disheartening to me. While perhaps not intentional, it happens far too often. I hope that more lawyers become aware of this and find ways to make sure they keep this in mind for all of their joint clients.

1. California Rules of Professional Conduct http://www.calbar.ca.gov/Attorneys/ConductDiscipline/Rules/Rules-of-Professional-Conduct/ Current-Rules 2. California rules of Professional Conduct Rule 1.7 http://www.calbar.ca.gov/Portals/0/ documents/rules/Rule_1.7-Exec_SummaryRedline.pdf 3. California Rules of Professional Conduct Rule 1.4 Communication with Clients http://www. calbar.ca.gov/Portals/0/documents/rules/ Rule_1.4-Exec_Summary-Redline.pdf

Christina Weed, JD, LLM (Taxation) is a Partner at Mendes Weed, LLP in Walnut Creek and a Co-Founder of Weed Law, PC. mwlawca.com; weedlawpc.com; (925) 390-3222. California Certified Specialist in Taxation Law.