Id.  at 48 (citations omitted; emphasis added).  The Court of Appeals reaffirmed this conclusion in Matter of Estate of Cassone, 63 N.Y.2d 756 (1984), in which it rejected a challenge to an arbitration clause based on the fact that the clause had been drafted by an attorney representing all parties to the contract.  Id. at 758.  Thus, in determining whether "a disinterested lawyer would believe that the lawyer can competently represent the interests" of two simultaneously represented clients with differing interests under DR 5–105(C), whether in the same or unrelated matters, we must be mindful of the overarching right of clients to be represented by their chosen counsel, even where they choose the same one.  Accordingly, we believe the following factors should be considered:

1.                  The nature of the conflict.  In a transaction where common interests predominate over issues in dispute, the possibility of an adverse effect on the exercise of the lawyer's independent professional judgment is significantly mitigated.  In the example of simultaneous representation of one client in litigated matters and the other in an unrelated loan  transaction, the interests of the two clients in closing the loan transaction appear to predominate over the areas of conflict, many of which raise business (as opposed to legal) issues.  Significantly, the law firm's representation of ABC Corp. in products liability litigation will not be affected in any way by the representation of the lender client in connection with the loan,  which does not provide the law firm any motive or incentive to be less zealous in its representation of ABC Corp.   Indeed, the law firm would have no reason to be less vigorous in its representation of ABC Corp. in the products liability litigation merely because it was representing a lender to ABC Corp. because the lender client would not benefit from any such diminished loyalty.  Finally, the dynamics of the lender/borrower relationship, at least at the early stages, are very different—indeed, some might say more aligned—than the contentious relationship that typically prevails between plaintiff and defendant.

Similarly, the context of the proposed representation of multiple clients in the same transaction may dictate the outcome of the disinterested lawyer test.  Where the interests of the parties are inherently antagonistic, such as the interests of the hostile bidder and the target in a corporate takeover, simultaneous representation generally will be ethically impermissible.  See Wolfram, § 7.3.4; Simon's New York Code of Prof'l Resp. Ann. DR 5-105, at 337 ("only rarely may a lawyer ethically represent both sides of the same transaction").  Situations in which a lawyer or members of a single law firm would be required to negotiate directly with herself or each other on behalf of multiple clients in a transaction also will rarely be consentable.

In other contexts, however, the conflict involved may be less direct and contentious and, therefore, more amenable to simultaneous representation with informed client consent.  We think it too simplistic merely to inquire whether a lawyer or law firm is on "both sides" of a transaction.  The more relevant inquiry is whether the nature of the concurrent roles that the lawyer is being asked to play precludes consent from being effective.  This distinction is illustrated by two corporate clients requesting a single law firm to represent both in the purchase and sale of a subsidiary.   If the dual representations require lawyers to directly negotiate the substantive business terms with each other, the direct adversity could preclude such concurrent representation-even with consent.  On the other hand, if the engagements were limited, at least on one side, so that head-to-head negotiations between lawyers in the same firm were eliminated, concurrent representation with consent would be allowable.   In this vein, where a single firm serves as mergers and acquisitions counsel to one corporation in a friendly merger and as antitrust counsel to the other merging corporation for purposes of securing regulatory approval, we do not think the nature of the conflict forecloses effective consent.  Under these circumstances, mergers and acquisitions counsel could represent its client without an adverse effect on its professional judgment because counsel’s primary interest is the consummation of the merger on the best terms available; antitrust counsel's primary work on behalf of the other client will be in furtherance of obtaining necessary regulatory approvals for the transaction to proceed, and not on improving the terms of the deal.  Because the antitrust lawyer's engagement would not be directly opposed to its own firm's efforts on behalf of the other party, informed consent could be effective.

These illustrations are by no means a comprehensive catalogue of the various means available to ameliorate the direct adversity that might otherwise emanate from multiple representation in a single transaction.  Indeed, adverse clients desiring to utilize a single law firm on opposite sides of a transaction could each retain separate counsel to assure adequate representation by the lawyers from the law firm retained to represent each side.  In the Committee's view, this practice would sufficiently ameliorate the nature of the conflicts to allow consent to be adequate.  As EC 5-15 recognizes, "If the interests vary only slightly, it is generally likely that the lawyer will not be subject to an adverse influence and that the lawyer can retain his or her independent judgment on behalf of each client . . . ."  To be sure, whether the divergence in the positions of the two clients in the transaction is so severe as to render a conflict non-consentable must be evaluated on a case-by-case basis, with the ultimate resolution turning on the nature of the specific engagement undertaken and the other precautions the attorneys employ.

2.                  The likelihood that client confidences or secrets in one matter will be relevant to the other representation.  As noted, one function of the rule against simultaneous adverse representation is to protect the client's confidences and secrets.  To the extent that neither client's confidential information could be used to its disadvantage in the conflicting representation or to the advantage of the other client, this concern is not implicated.  It is true that the propriety of an adverse concurrent representation in litigated matters is measured not by the similarities in the two matters, but by the duty of loyalty that the attorney owes to each of the clients.  See Cinema 5, Ltd. v. Cinerama, Inc., 28 F.2d 1384, 1386 (2d Cir. 1976).  Nevertheless, the fact that the concurrent representation in a transactional matter of one client with interests adverse to another client in a different transactional matter does not give rise to the opportunity to compromise confidences or secrets of either client because of the dissimilarities of the two matters is relevant in evaluating the potential impact on the lawyer's professional judgment in this context.  In cases where a lawyer is asked to represent multiple clients in the same transaction, the confidences and secrets of those clients are clearly relevant.  Nonetheless, concurrent representation is permissible where appropriate measures may be taken to protect those confidences and both clients knowingly consent.^[5]

3.                  The ability of the lawyer or law firm to ensure that confidential information of the clients will be preserved.  Assuming that confidential information of one client may be relevant to the adverse concurrent representation of the other, what safeguards can the lawyer or law firm offer to ensure the confidential treatment of all such information?  "Screening" has not yet attained general recognition in New York as a substitute for client consent or as a conflict avoidance mechanism, except to avoid firm-wide disqualification in the case of the former government lawyer, or in other limited circumstances.  See DR 9-101(B); Kassis v. Teacher's Insurance & Annuity Assân, 93 N.Y.2d. 611 (1999); see also, Gillers, Barbara S., "`Kassis' Case and its Impact on the Legal Hiring Practices at New York Law Firms," New York Law Journal, September 21, 1999; but see Cummins v. Cummins, 264 A.D.2d 637 (1^st Dep't 1999).  Nevertheless, screening and the establishment of other information control devices may be appropriately offered by the lawyer or demanded by the client as a condition of the client's consent.  The client may agree to information control mechanisms such as "firewalls," file segregation and separate legal teams to protect the confidentiality of its information.

There is no reasoned basis to believe that screening could not be effective in a situation where a firm simultaneously represents parties with differing interests in the same matter.  See Jonathan J. Lerner, "Eliminating the Gamesmanship," N.Y.L.J., Feb. 7, 1984 (quoting dissent by Judge Newman in Armstrong v. McAlpin, 625 F.2d 433, 453 (2d Cir. 1980) (en banc) (dissent), vacated on other grounds, 449 U.S. 1106 (1981) ("I do not see why a Chinese Wall should be thought more impervious to information that originated from a government investigation than to information learned from a client without adverse interests.").   In fact, the risk of misuse of client confidences and secrets can be reduced further depending on the nature of the dual representation.  By minimizing direct adversity of the dual roles played by counsel, the effectiveness of screening is likely to be enhanced.  For example, where the firm's mergers and acquisitions department represents one client and its antitrust or tax department the other client, "the likelihood of contact between a 'screened' attorney and one handling an adverse representation is normally reduced when the two groups operate in different departments within the firm."  "Conflicts of Interest in Private Practice," 94 Harvard L. Rev. 1284, 1367-68 (1981).

4.                  The ability of the lawyer to explain, and the client's ability to understand, the reasonably foreseeable risks of the conflict.  DR 5-105(C) requires that a lawyer seeking to obtain consent make "full disclosure of the implications of the simultaneous representation and the advantages and risks involved."   In so doing, the lawyer should apprise the client whose consent is sought of the kinds of conflicts that the client would be consenting to waive and the effect of the consent.  There may be circumstances where a lawyer's duty of confidentiality to one client will prevent the lawyer from being able to explain fully to the other client the nature of the conflict and the material and reasonably foreseeable ways that the conflict could adversely affect the client's interests.

In this connection, the sophistication of the client is a factor that must be considered in determining the effectiveness of client consent to a transactional conflict.  See EC 5-16 ("the lawyer should explain fully to each client the implications of the common representation and otherwise provide to each client information reasonably sufficient, giving due regard to the sophistication of the client, to permit the client to appreciate the significance of the potential conflict . . . .").  A client represented by other counsel or in house counsel in connection with the waiver may more readily comprehend the possible effects on loyalty and confidentiality of the simultaneous adverse representation.  To be sure, sophisticated corporate and institutional clients can consent to conflicts which might be non-consentable in cases involving unsophisticated lay clients who are not represented by independent counsel in connection with the consent.  For example, in Allegaert v. Perot, 434 F. Supp. 790, 799 (S.D.N.Y.), aff'd, 565 F.2d 246 (2d Cir. 1977), the United States District Court for the Southern District of New York relied on the fact that an attorney's clients were sophisticated Wall Street brokerage firms in rejecting an allegation that the attorney's failure to notify these clients of the perils of simultaneous representation violated Canon 5.  In this same vein, the United States District Court for the District of Wisconsin found that the independent review and approval of a simultaneous representation by a commercial client's internal legal department effectively authorized the multiple representation.  Int'l Union, United Automobile, Aerospace & Agricultural Implement Workers v. Allis-Chalmers Corp., 447 F. Supp. 766, 771 (E.D. Wis. 1978).  In cases where a corporate client itself has an in-house legal department, it is difficult to see why such a client should not be allowed to consent to simultaneous representation by the same law firm of diverging interests in the same matter, especially where that client desires, or is demanding, that the firm do so.