ABA Formal Opinion 516 “Terminating representation without material adverse effect”, issued on April 2, 2025 is important in two respects. First, it advises lawyers that dropping a client to represent a more favored client, often referred to as the “hot potato” doctrine, is not in itself a violation of ethical obligations. Second, the opinion provides guidance to lawyers on when withdrawal would be improper because it has a material adverse effect on a client. However, the importance of the opinion should not be overstated. The committee is clear that it is only dealing with interpretation of the rules of professional conduct; courts dealing with disqualification motions or claims for breach of fiduciary duty may apply different standards. In addition, despite the guidance given by the opinion, “material adverse effect” is fact specific; if a matter has gone beyond its earliest stages, withdrawal based on lack of material adverse effect is risky.

Nathan M. Crystal