3 Types of Adversity in Conflicts

Adversity implies a relationship between two parties where there is the potential for harm or unfavorable results in success or development for one or both sides.  In legal matters, adversity does not necessarily imply contention; and contention does not necessarily imply litigation.  Let’s explore three scenarios.

1.    A legal matter where your client, X, is adverse to Y, in a contract negotiation.  For example, X and Y agree to enter into a business relationship where X, a manufacturer, sells a product at wholesale value to make a profit, and Y, a retailer, then sells that product at retail value to make a profit as well.  

2.    A legal matter where your client, X, is adverse to Y, in a breach of contract.  For example, X failed to deliver goods to Y within an agreed upon date, resulting in Y not delivering the product as advertised to consumers causing them potentially to lose customers.

3.    A legal matter where your client, X, is adverse to Y, in a lawsuit.  For example, Y goes out of business because it depended on X to deliver wholesale goods, which were advertised to consumers, but X never delivered, and Y went bankrupt as a result of cost of the ad campaign and bad reputation that followed.

All three scenarios above involve adversity.  #1 involves a relationship where the parties are likely on good terms, or at least likely not (yet) on bad terms, and each party is self-interested.  #2 involves a relationship where the parties are not on good terms, as the word “breach” implies that there is a dispute about circumstances that  occurred according to the terms of an agreement. #3 involves a relationship where there is a plaintiff and a defendant, as the matter has ripened into litigation.

When running conflict checks, it is important to distinguish between adversity, contention, and litigation.  Here is why:

Let’s imagine that a conflict exists because Y is also a client of another attorney at the same firm in a separate, unrelated matter.

·      In scenario #1 above, which may likely be beneficial to both parties, and the outcome on both sides may be favorable if the contract is executed.  So, when searching for the adverse party, if a conflict is found with the exact party or an affiliate of that party, it is likely that both sides will consent to the matter proceeding accordingly.  

·      A matter such as in #2 above, may at one point have benefited both sides, or the parties may have expected some mutually beneficial outcome, but one side acted or failed to act in a manner that was not agreed upon in the contract.  The likelihood of a waiver to be obtained from both sides if a conflict exists is less likely than in the first scenario.  A dispute has occurred, and there is a potential for a lawsuit or legal action to follow.

·      A matter such as in #3 above is not likely to benefit both sides of the aisle.  A decision has to be made that will ultimately favor the plaintiff or the defendant (or they may settle). Here, if a conflict exists, a waiver will most likely not be granted by either side due to the severity of the outcome in litigation against the parties or one of their affiliates.  

The example(s) provided above not only demonstrate why it is important to distinguish between the type of adversity in each matter, but also why it is important to distinguish between the matters.  For example, a waiver granted in scenario 1 above would not apply to scenario 3.  The parties would have to explicitly consent to the representation in the lawsuit.

I invite you to share comments or questions.

Thank you,

Ryan Vago

Founder & President 

RION Corp.