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 advisory opinion.

The Ohio Board’s opinion updates an older opinion issued under the state’s former Code of Professional Responsibility.  (Ohio adopted its version of the Model Rules of Professional Conduct effective February 1, 2007.)

In the new cognovit judgment opinion, the Board interpreted Ohio Revised Code § 2323.13, which authorizes a lawyer to confess judgment against a debtor if there is a valid warrant to do so.  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’s version of Model Rule 1.7, governing conflicts of interest:  under Ohio Rule 1.7(c), 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 “No,” and ruled that it did not even have to carry out an analysis under the conflict rule.  Applying Ohio case law from 2008,  DiBenedetto v. Miller,  the Board said that in the case of a cognovit note, the confessing lawyer’s client is the creditor, not the debtor.  Therefore, “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.”  Instead, the lawyer is acting only on behalf of the creditor, as authorized under the note and the cognovit statute.

Earlier this year, in Huntington Nat’l. Bank v. G.J.P. Props. LLC, an Ohio court of appeals implicitly came to the same conclusion as DiBenedetto.

Notwithstanding the Board’s recent decision on the conflict issue, the cognovit-note picture may be a complicated one, and it pays to tread carefully.  Each state has its own cognovit note statute or rules, and there may be enforceability issues about judgments obtained in other states — 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.  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:  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.  But lawyers outside Ohio should evaluate their own state’s statutes and ethics rules.  And lawyers everywhere should also consider whether any other ethics issues may affect your representation.