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Confessing judgment on behalf of a cognovit note debtor does not place a lawyer in an inherent conflict of interest, the Ohio Board of Commissioners on Grievances and Discipline has held in an <a href="https://www.ohioadvop.org/wp-content/uploads/2017/04/Op_14-003.pdf" target="_blank" rel="noopener">advisory opinion</a>.
The Ohio Board&rsquo;s opinion updates an older opinion issued under the state&rsquo;s former Code of Professional Responsibility.&nbsp; (Ohio adopted its version of the Model Rules of Professional Conduct effective February 1, 2007.)
In the new cognovit judgment opinion, the Board interpreted <a href="http://codes.ohio.gov/orc/2323.13">Ohio Revised Code &sect; 2323.13</a>, which authorizes a lawyer to confess judgment against a debtor if there is a valid warrant to do so.&nbsp; Cognovit notes almost universally provide the warrant, in which the debtor consents in advance to a creditor obtaining judgment against the debtor without notice or hearing.
The warrant of attorney includes a warning to the debtor about the rights that the debtor is relinquishing.
The potential ethics quandary is presented by Ohio&rsquo;s version of <a href="http://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_1_7_conflict_of_interest_current_clients.html">Model Rule 1.7</a>, governing conflicts of interest:&nbsp; under <a href="http://www.supremecourt.ohio.gov/LegalResources/Rules/ProfConduct/profConductRules.pdf">Ohio Rule 1.7(c)</a>, does the confession of judgment involve the lawyer in an un-waivable conflict of interest, by asserting a claim by one client against another client represented by the lawyer in the same proceeding?
The Ohio Board said &ldquo;No,&rdquo; and ruled that it did not even have to carry out an analysis under the conflict rule.&nbsp; Applying Ohio case law from 2008,&nbsp; <a href="http://www.supremecourt.ohio.gov/rod/docs/pdf/1/2008/2008-ohio-6506.pdf">DiBenedetto v. Miller</a>,&nbsp; the Board said that in the case of a cognovit note, the confessing lawyer&rsquo;s client is the creditor, not the debtor.&nbsp; Therefore, &ldquo;there can be no conflict of interest under [Rule 1.7(c)] because an attorney-client relationship does not exist between the confessing attorney and the debtor.&rdquo;&nbsp; Instead, the lawyer is acting only on behalf of the creditor, as authorized under the note and the cognovit statute.
Earlier this year, in <a href="http://www.supremecourt.ohio.gov/rod/docs/pdf/10/2014/2014-ohio-124.pdf">Huntington Nat&rsquo;l. Bank v. G.J.P. Props. LLC</a>, an Ohio court of appeals implicitly came to the same conclusion as DiBenedetto.
Notwithstanding the Board&rsquo;s recent decision on the conflict issue, the cognovit-note picture may be a complicated one, and it pays to tread carefully.&nbsp; Each state has its own cognovit note statute or rules, and there may be enforceability issues about judgments obtained in other states &mdash; particularly when you represent a judgment creditor seeking to enforce a judgment in a state with different requirements for cognovit proceedings than the state where the judgment was originally entered.&nbsp; On the ethics side, there might be multi-jurisdictional practice issues, as well, if you are engaged in a transaction that crosses state borders and that involves a cognovit note.
Bottom line:&nbsp; the recent Ohio Board decision on cognovit judgment conflicts is a good update of its earlier ruling, and is a welcome clarification for Ohio lawyers.&nbsp; But lawyers outside Ohio should evaluate their own state&rsquo;s statutes and ethics rules.&nbsp; And lawyers everywhere should also consider whether any other ethics issues may affect your representation.

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Ethics

Legal Ethics, Professional Responsibility and the Business of Law

No inherent conflict in confessing judgment via cognovit note, Ohio Board says