You Can’t Play Both Sides and Win! : Conflict of Interest
Gebman v. Comm’r, T.C. Memo. 2017‑184, 2017 WL 4158699 (2017)
(a) Facts: A husband and wife signed a joint tax return. The IRS assessed a deficiency. Both parties sought relief in the Tax Court.
When the case was called, no one appeared for the taxpayers. The husband appeared later in the day to make a motion for a continuance, which was denied. Since the husband lacked counsel, and a group of volunteer lawyers was in the courtroom, the husband was given the opportunity to speak with a volunteer lawyer. The husband accepted the opportunity and was given time to speak with one of the lawyers.
The case was called again, the volunteer lawyer appeared for the husband, and he conceded liability for the entire amount of the deficiency, including any penalty. The lawyer then told the court that the wife wanted to request innocent spouse relief. This would require an amendment to the wife’s pleadings, which would require leave of court, but the court granted a continuance so that a motion for leave to amend could be prepared.
One month later, the husband filed a pro se motion to rescind his concession of liability, alleging that counsel had misinformed him, and stating that counsel had been discharged. The motion further stated that the husband wanted to contest both the deficiency and the wife’s right to innocent spouse relief.
At about the same time, the wife filed her motion for leave to amend. The wife’s motion was filed by the same volunteer lawyer who had spoken for the husband at the hearing.
On its own motion, the court inquired as to whether the same volunteer lawyer could ethically represent both spouses in the action.
The lawyer testified that he had told the husband that the husband’s position could not be supported by existing law or by a good-faith argument to modify existing law. He told the husband he would not appear on the husband’s behalf unless he conceded the deficiency but that he would represent the husband for purposes of collection.
The husband expressly stated that he no longer wished the lawyer to represent him, but he refused to sign a waiver of conflict.
(b) Issue: Can the same lawyer ethically represent both the husband and the wife in an innocent spouse case?
(c) Answer to Issue: No.
(d) Summary of Rationale: An attorney-client relationship was formed when the volunteer lawyer agreed to represent the husband in the original hearing. The fact that representation was for a limited purpose (e.g., not to contest the deficiency) did not change the result. The attorney-client relationship continued until the husband discharged the lawyer.
The lawyer later agreed to represent the wife. But the wife’s interests and the husband’s interests were adverse because the husband challenged the wife’s right to innocent spouse relief. An attorney cannot represent a person with interests adverse to a prior client, in the same matter, without a written waiver. Because the husband refused to waive the conflict, the lawyer could not ethically represent the wife. The court relied materially upon the similar holding in Harbin v. Commissioner, 137 T.C. 93 (2011), discussed in the 2012 version of this outline.
Obvious Lesson: The same lawyer cannot represent both the husband and the wife in an innocent spouse case unless the conflict is waived in writing. The interests of the parties are often opposed.
Comment: Conflicts of interest are no less serious in an attorney’s pro bono cases than in cases with paying clients. One can feel a certain amount of sympathy for the attorney who took on a pro bono client from the goodness of his heart and ended up in serious ethical difficulty. As the saying goes, “no good deed goes unpunished.” But the rule against representing both spouses in an innocent spouse case is significant and longstanding.