FORMER CLIENT -
THE SUBSTANTIAL RELATIONSHIP
TEST
[Home] [Table of Contents]
Following are the
subtopics discussed at this section. To go to a topic, click on it.
When
Does a "Current Client" Become a "Former Client?"
What Is
"Substantial Relationship?"
What Is
"Materially Adverse?"
"Accommodation Client"
The "Playbook View" of the Substantial Relationship Test
Other Cases Involving Former Clients
Introduction
Model Rule 1.9(a)
states as follows:
A lawyer who has formerly represented a client
in a matter shall not thereafter represent another person in the same or a substantially
related matter in which that person's interests are materially adverse to
the interests of the former client unless the former client consents
after consultation.
(emphasis added)
We discuss obligations with respect to current clients at the section
entitled, "Current Client and Direct Adversity." To go there,
click here. For purposes of this section, the key provision
regarding current clients is at Model Rule 1.7(a):
A lawyer shall not represent a client if the
representation of that client will be directly adverse to another
client, unless . . . .
(emphasis added)
Thus, it
makes a difference, for conflicts purposes, whether the client is
"current" or "former." If the client is current, the
lawyer may not be directly adverse without consent. As to former clients,
the lawyer may be directly adverse unless the new matter is "substantially
related" to what the lawyer did for the former client.
This
section is built around two issues: (1) When does a current client
become a former client - and thus trigger the substantial relationship test?;
and (2) What is "substantially related"? Included is a
discussion of the "accommodation client" concept. Finally, the section deals with an important subset of the substantial relationship issue - what
Professor Wolfram refers to as the "playbook view." Charles W.
Wolfram, Former-Client Conflicts, 10 Geo. J.
Legal Ethics 677 (1997). The "playbook view" refers to situations where a lawyer
learns from a current client how the client approaches - or specific employees
of the client approach - legal matters, thereby giving the lawyer a supposed
advantage when opposing that person or entity as a former client. More
about Professor Wolfram's article and the "playbook view" later.
Another very helpful
source on these issues is Joan C. Rogers, Conflicts of Interest:
Representation Adverse to Former Client, Current Reports, August 14, 2002, p.
490, ABA/BNA Law.
Man. Prof.
Conduct, now pages 51:201-243 in
the large binder. It is an
excellent 30-page article on former clients. It includes such subjects as
client mergers/asset sales, joint defense arrangements, "accommodation
clients," "playbook" information, advance consents, and much,
much more. It is the best writing on these subjects since
Professor Wolfram's article, cited above. Anyone with a former client
issue should consult the Wolfram and Rogers articles. This site will
continue to add cases on these subjects.
Warning:
More cases deal with former client issues than just about any other issue
relating to conflicts of interest. The cases also tend to be more
fact-specific than those in other areas - particularly as to what is
"substantially related." Thus, many of them have relatively
little value as precedent. It is the philosophy of this site to be as
comprehensive as possible in including cases and opinions. However, given
the large number of cases on these subjects and their fact-specific nature, we will cite leading examples without trying to set a record for number of
cases and opinions cited.
Treatise. Hazard & Hodes §§ 13.2-13.12.
Article.
Amanda Kay Morgan, Screening
out Conflict-of-Interests Issues Involving Former Client: Effectuating Client
Choice and Lawyer Autonomy while Protecting Client Confidences, 28 J.
Legal Prof. 197 (2004).
When Does a "Current Client" Become a "Former Client"?
When confronted with a
conflict of interest argument, a lawyer would love to be able to fish out of her
file a letter to the client that says the following:
This matter has concluded. We plan to do no further work
for you, and you are no longer our client.
Lawyers hate to write
letters like that. A truly effective letter may offend the client.
Moreover, the lawyer wants to maintain a bond with the client so that it will
send more business. Thus, these letters are rarely written, and the courts
must resort to other indicia. Following are examples of cases where the
courts did so:
Law firm's failure
to document end of relationship keeps it in case.
Jenifer v. Fleming, Ingram & Floyd, P.C., 2008 U.S. Dist. LEXIS 5492
(S.D. Ga. Jan. 25, 2008).
Fenik v. One Water Place, LLC,
2007 U.S. Dist. LEXIS 10096 (N.D. Fla. Feb. 14, 2007).
Law firm had ceased representing plaintiff on other matters several months prior
to this case being filed. That law firm appeared for the defendant
in this case. The court denied plaintiff's motion to disqualify law firm,
noting, among other things, that plaintiff hired a different law firm to file
this case.
Jones v. Rabanco, Ltd., 2006 U.S. Dist. LEXIS 53766 (W.D. Wash. Aug.
3, 2006). Work had ceased three years prior, but: (1) client's officers
stated they believed it was still a client; (2) the law firm in question was
listed as one to receive notice of a breach of the settlement agreement, which
was to remain in force until 2011; (3) the law firm had not written a letter
saying the representation had ceased; (4) the law firm's books showed the matter
as "open;" and (5) the law firm was incurring the cost of storing 49
boxes of documents in case they were needed for further developments in the
prior matter. Court held, "current client."
Kabi Pharmacia AB
v. Alcon Surgical, Inc., 803 F. Supp. 957 (D. Del. 1992) The law firm had
not given the client advice for "many months," but the court held that
it was still a current client.
Research Corp.
Tech. v. Hewlett-Packard Co., 936 F. Supp. 697 (D. Ariz. 1996). One
brief, but recent, contact was enough to create a current client relationship.
JTH Tax, Inc. v. H
& R Block Eastern Tax Services, Inc., 2002 U.S.
App. LEXIS 477 (4th Cir. 2002). A law firm was representing JTH against
Block in federal court, while representing Block in a state court action.
The district court held that the law firm did not violate Rule 1.7(a), because
the state court action was
"dormant." The court then did a former client analysis.
Int'l. Bus. Machines
Corp. v. Levin, 579 F.2d 271 (3d Cir. 1978). A lawyer handled a series
of labor matters for IBM. Shortly after completion of the most recent one,
the lawyer showed up on the other side of an antitrust case. The court
upheld the district court's disqualification of the firm and said:
Although [the firm] had no specific assignment from IBM on
hand on the day the antitrust complaint was filed and even though [the firm]
performed services for IBM on a fee for service basis rather than pursuant to
a retainer arrangement, the pattern of repeated retainers, both before and
after the filing of the complaint, supports the finding of a continuous
relationship.
Oxford Systems,
Inc. v. CellPro, Inc., 45 F. Supp. 2d 1055 (W.D. Wash. 1999). The
law firm had done all a company's work in the State of Washington for 13
years. At the time it took on a matter adverse to the company, nothing
had been pending for about a year. Nevertheless, the court held that the
company was a current client because of the company's General Counsel's
subjective belief that it was a current client. To the same effect
(although individual), Shearing v. Allergan, Inc., 1994 WL 382450 (D.
Nev. 1994).
McCook Metals
L.L.C. v. Alcoa, 2001 U.S. Dist. LEXIS 497 (N.D. Ill. 2001). Alcoa
had a brief flirtation with Jenkens & Gilchrist ("J&G"), which included the
exchange of general information. Alcoa assigned a trademark search to
J&G, which consumed just several days. A few days after the
trademark search concluded, J&G entered into litigation against Alcoa for
McCook. Alcoa moved to disqualify J&G, and the court denied the
motion.
Riggs Nat'l. Bank of
Washington, D.C. v. Calumet-gussin, 1992 U.S. Dist. LEXIS 16475 (D.D.C.
1992). A law firm handled several matters for a client. When
the client refused to pay a total of $270,000 in overdue fees, the firm withdrew
from one case. The only other pending matter, an administrative
proceeding, concluded at about the same time. Shortly after all this
occurred a bank retained the firm to sue the "former client."
The court refused to disqualify the firm. The court stressed that at the
time the firm severed its relationship with the former client, the firm knew
nothing of the bank's claim against the former client.
Artromick Int'l., Inc.
v. Drustar, Inc., 134 F.R.D. 226 (S.D. Ohio 1991). About a year had
elapsed since the law firm had done any work for the client. A small
invoice remained outstanding. The firm sent at least one piece of
promotional material to the client during that year. Nevertheless, the
court refused to disqualify the firm when it showed up on the other side of a
case.
Manoir-Electroalloys,
Inc. v. Lachmann, 711 F. Supp. 188 (D.N.J. 1989). A law firm had done
many things for a client "from the 'seventies" until1983-84. It
sent a "dear friend" letter to the "client" in 1988.
It turned up on the other side of a matter shortly thereafter. It was one
of those situations where a "we-don't-represent-you" letter would have
been nice. In disqualifying the firm, the court commented:
[The firm] cannot, of course, isolate any point in time at
which [the "client"] became a "former client" and relies
solely on the fact that the last piece of business [the firm] was called upon
by [the "client"] to handle preceded the filing of the . . . action
by four years.
Distinguishes Manoir-Electroalloys (just above). Spiniello Companies v. Metra Industries, Inc., 2006 U.S. Dist. LEXIS
72961 (D.N.J. Oct. 6, 2006). Court did not find client to be current where
lawyer had handled "two discrete and concluded matters several years ago
(in 2001 and again in 2003)."
Heathcoat v. Santa Fe
Int'l. Corp., 532 F. Supp. 961 (E.D. Ark. 1982). A law firm did a
simple will for a client in 1966. In 1982 she moved to disqualify the firm
in a case involving whether misrepresentations had been made to her in the sale
of property. The only event that intervened was the firm sent her a
"dear friends" letter about its services. The court refused to
disqualify the firm.
Gray v. Gray, 2002 Tenn. App. LEXIS 675 (Tenn. App. September 19,
2002). Lawyer did a will for a client and then nothing further for that
person for ten years. The court held that, ten years later, the lawyer
could be adverse to the person, even though the lawyer had not written a
termination letter after completing the will.
Ferguson Electric
Co. v. Suffolk Construction Co., 1998 Mass. Super. LEXIS 289 (Mass. Super.
1998). The lawyer was not clear in communications with the client that the
work had been completed and the relationship terminated, so the court found a
current relationship.
Abbott Laboratories v.
Centaur Chem. Co., Inc., 497 F. Supp. 269 (N.D. Ill. 1980). An outside
lawyer was handling an administrative proceeding for a company. When the
matter reached a stage of relatively little activity, it was turned over to an
in-house lawyer. After about 11 months the outside lawyer showed up on the
other side of another matter. The company claimed that it was a current
client because it "might" have to involve the lawyer again in the
earlier matter. The court did not buy that argument and refused to
disqualify the lawyer in the later matter.
Mindscape, Inc. v.
Media Depot, Inc., 973 F. Supp. 1130 (N.D. Cal. 1997). Although the
firm claimed the representation had ended, the court noted that the firm still
had not cleaned up a patent mistake it had made, the firm still had a power of
attorney from the "client," and the firm had never specifically
advised the "client" that the representation had ended.
Accordingly, the court found that the relationship was a current-client one.
Voicenet
Communications, Inc. v. Pappert, 2004 U.S. Dist. LEXIS 6429 (E.D. Pa. April
5, 2004). Fifteen months passed since the last work. The court held
that the client became a former client.
See, too, SWS
Financial Fund A v. Salomon Bros., Inc., 790 F. Supp. 1392 (N.D. Ill. 1992),
and G.D. Searle & Co. v. Nutrapharm, Inc., 1999 U.S. Dist. LEXIS 5963
(S.D.N.Y. 1999).
In Schiefler v. Warner, Norcross & Judd, 2006
Mich. App. LEXIS 471 (Mich. App. Feb. 23, 2006), the firm had represented the
co-owner of a closely-held entity "for decades," so it could not claim
that he recently became a former client, so that it could be adverse to him in
litigation.
Medical Diagnostic Imaging, PLLC v. Carecore Nat., LLC, 2008 U.S. Dist.
LEXIS 23596 (S.D.N.Y. March 25, 2008). Two
doctors affiliated with a defendant intervened in this case to move to
disqualify a law firm for the plaintiffs. In
a highly fact-intensive analysis the magistrate judge, in this opinion, held
that the doctors were former, not current, clients of the law firm, even though
the doctors pointed to circumstances suggesting they were current clients.
Poor illustration but
one nonetheless, Roderick
v. Ricks, 54 P.3d 1119 (Utah
2002).
See, too, D.C.
Op. 272
(1997).
What is "Substantial Relationship"?
Model Rule 1.9(a)
is quoted in the Introduction. It specifically adopts the
"substantial relationship" rubric. Comments [1], [2], and [11]
contain some language suggesting a definition. New Comment [3], adopted by
the ABA House of Delegates in February 2002, does a pretty good job of
explaining what it is. It begins
with the following language, then follows with a number of examples:
[3] Matters are "substantially related" for
purposes of this Rule if they involve the same transaction or legal dispute or
if there otherwise is a substantial risk that confidential factual information
as would normally have been obtained in the prior representation would
materially advance the client's position in the subsequent matter. For example, . .
.
The Restatement
attempts to define "substantial relationship" in the black letter of
§ 132, and is similar to the above comment:
(1) the current matter involves the work the lawyer performed
for the former client; or
(2) there is a substantial risk that representation of the
present client will involve the use of information acquired in the course of
representing the former client, unless that information has become generally
known.
The ABA Model Code did not
use the term at all. The judge in T.C. Theatre Corp. v. Warner Brothers
Pictures, Inc., 113 F. Supp. 265 (S.D.N.Y. 1953), introduced it in the
following sentence:
The former client need show no more than the matters embraced
within the pending suit wherein his former attorney appears on behalf of his
adversary are substantially related to the matters or cause of action
wherein the attorney previously represented him, the former client.
(emphasis added)
The court did not attempt
a comprehensive definition of the term, but did apply it to facts before the
court. The court said:
In sum, enough appears to show that Mr. Cooke's present
representation deals with matters as to which his former client reposed
confidence[s] in him. Hence, I hold that Mr. Cooke is disqualified from acting
as counsel for the plaintiff in this case in any capacity so long as Universal
is a party defendant, and the motion is granted to this extent.
Thus, the use of
confidences gained from the former client plays an important role in application
of the substantial relationship standard. This point is made in Professor
Wolfram's article, Charles W. Wolfram, Former-Client Conflicts, 10 Geo.
J. Legal Ethics 677 (1997). This is a terrific article that covers the
subject of the title comprehensively. Anyone wanting an exhaustive review
of a great number of cases and ethics opinions should start with Professor
Wolfram's article. He points out that while the two pillars of conflict of
interest rules are loyalty and confidentiality, loyalty plays (or at least
should play) little or no role in defining responsibilities to former
clients. Professor Wolfram also notes that most of the cases, and the
better decided ones, emphasize "the client's legitimate expectation in the
confidentiality of information imparted to the lawyer."
California's Rule of
Professional Conduct 3-310(E) does not use the "substantially related"
terminology, but its emphasis is the same:
A member shall not, without the informed written consent of
the client or former client, accept employment adverse to the client or former
client where, by reason of the representation of the client or former client,
the member has obtained confidential information material to the employment.
Following are
examples of the different ways courts articulate the substantial relationship
test. Analytica v. NPD Research, Inc., 708 F.2d 1263 (7th Cir.
1983) is frequently cited. It said that a substantial relationship
exists if a "lawyer could have obtained confidential information in the
first representation that would have been relevant in the second."
The court said that it is irrelevant whether the lawyer actually obtained such
information. In Integrated Health Services of Cliff Manor, Inc. v.
THCI Co. LLC, 327 B.R. 200 (D. Del. 2005), the court
quoted language from Satellite Fin. Planning Corp. v. First Nat’l. Bank of
Wilmington, 652 F. Supp. 1281, 1284 (D. Del. 1987) cautioning that courts
should not:
"allow [their] imagination[s] to run free
with a view to hypothesizing conceivable but unlikely situations in which
confidential information 'might' have been disclosed which would be relevant
to the present suit".
In Harsh v.
Kwait, 2000 Ohio App. LEXIS 4636 (Ohio App. 2000), the court said that
matters were substantially related if there is some "commonality of
issues" or "clear connection" between the matters.
In Reardon v.
Marlayne, 416 A.2d 852 (N.J. 1980), the court said that a substantial
relationship exists where the "adversity between the interests of the
attorney's former and present clients has created a climate for the disclosure
of relevant confidential information."
Kentucky abandoned
the "appearance of impropriety" standard when it adopted its version
of the Model Rules. Nevertheless, the court in Lovell v. Winchester,
941 S.W.2d 466 (Ky. 1997), applied it in a former client situation and ordered
the lawyer disqualified. There the lawyer had obtained information from
a client but claims he did not remember any of it. The Arkansas Supreme
Court also based a former representation disqualification on an appearance of
impropriety, even though Arkansas had adopted the Model Rules, McAdams v.
Ellington, 970 S.W.2d 203 (Ark. 1998).
Importance of Loyalty in
Former Client Analysis. In re I Successor Corp., 321 B.R. 640 (S.D.N.Y.
2005). The court said that loyalty was just as important as
confidentiality. Pound
v. Cameron, 36 Cal. Rptr. 3d 922 (Cal. App. 2005), takes the majority view
that confidentiality is key.
Lawyer Attacking Work Done for a Former Client ("Own
Work").
While it is our view that the focus on former-client cases is, or should
be, on preserving the former client’s confidences or not using former
client’s confidences against the former client, an exception has been
expressed by some. That is, a
lawyer may not harm a former client by attacking the work the lawyer had done
for the former client. For example,
a lawyer should not attack a patent the lawyer had obtained for the former
client. Restatement §
132 cmt. d(ii) takes this view. Texas
Rule 1.09(a)(1) also contains this rule. Cases
that follow the rule are Franklin v. Callum, 782 A.2d 884 (N.H. 2001),
Sullivan County Regional Refuse Disposal Dist. v. Town of Acworth,
686 A.2d 755 (N.H. 1996), and In re Basco,
221 S.W.3d 637 (Tex. 2007). Hazard
& Hodes discuss the concept at §13.6.
Cases cited in the Reporter’s Note to Restatement
§ 132 cmt. d(ii) are: Griffith v. Taylor, 937 P.2d 297 (Alaska
1997); In re Breen, 830 P.2d 462 (Ariz. 1992); Gilbert v. Nat’l.
Corp. for Housing Partnerships, 84 Cal. Rptr. 2d 204 (Cal. App. 1999); and In
re Williams, 309 N.E.2d 579 (Ill. 1974).
Florida Bar ethics opinions that agree with the Restatement are Fla. Ops.
68-16 (1968) and 59-32 (1960). Similar
language appears in the Comment to Florida Rule 4-1.9. Greater Vancouver Reg’l Dist. v. Melville,
2007 BCCA 410 (CanLII) (Ct. App. of Brit. Col. Aug. 9, 2007) (rule implied).
David Hricik and
Jae Ellis, Disparities in Legal Ethical Standards Between State and Federal
Judicial Systems: An Analysis and a Critique, 13 Geo. J.
Legal Ethics 577
(2000). This article contains an excellent discussion of how Texas state
and federal courts treat the substantial relationship test.
Patent
Litigation. Superguide Corp. v. DirecTV Enterprises
Inc., 141 F. Supp. 2d 616 (W.D.N.C. 2001).
Plaintiff Superguide hired Dorman to represent it. The defendants filed a
third-party action against Gemstar. Gemstar moved to disqualify Dorman,
because Dorman previously represented Gemstar as lead counsel in all its patent
litigation. Dorman had also counseled Gemstar on a license agreement that
is the subject of this action. The court found that there was a
substantial relationship between this litigation and what Dorman had done
for Gemstar previously, and ordered that Dorman be disqualified. In Asyst Techs., Inc. v. Empak, Inc., 962 F.
Supp. 1241 (N.D. Cal. 1997), the court disqualified a law firm challenging two
patents that members of the firm had prosecuted on behalf of the other side.
Here are two more patent infringement cases where the court did not find a
substantial relationship, Talecris
Biotherapeutics, Inc. v. Baxter Int’l Inc., 491 F. Supp. 2d 510
(D. Del. 2007), and Arctic Cat, Inc. v. Polaris Industries Inc., 2004 U.S. Dist. LEXIS
25463 (D. Minn. Dec. 20, 2004).
Purchase of Patent
not Substantially Related to Infringement of Same Patent. Reliant
Pharmaceuticals, Inc. v. Par Pharmaceutical, Inc., 2008 U.S. Dist. LEXIS
33461 (D. Del. April 23, 2008).
Real Estate
Litigation. Henery v. 9th St. Apt., L.L.C., 2001 Neb.
App. LEXIS 117 (Neb. App. 2001). Sherrets represented Cutler in the
purchase of a downtown Omaha lot. Sherrets now represents Henery in
connection with a lot that abuts Cutler's lot. Henery claims that
underground footings for his building extend onto Cutler's lot, and he seeks to
have Cutler enjoined from developing his property in a way to jeopardize
Henery's building. Cutler moved to disqualify Sherrets. The Court of
Appeals affirmed the trial court's denial of the disqualification. The
court held that the two matters were not substantially related because Sherrets
was not aware of the footings when he represented Cutler in purchasing his lot,
and the "encroaching footings" simply played no role in that transaction.
For a similar analysis, see R.I. Op. 2001-08 (November 8, 2001). A lawyer assisted a client in connection
with developing Parcel A two years ago. Now another client wants the
lawyer to assist it in developing Parcel B, which adjoins Parcel A.
The opinion says that the second
representation does not necessarily violate the "substantial
relationship" test of Rhode Island Rule 1.9.
Birth Injury Cases. Vincent v. Essent Healthcare of Conn.,
465 F. Supp. 2d 142 (D. Conn. 2006)
.
Malpractice.
In Damron v. Herzog, 67 F.3d 211 (9th Cir. 1995), the court held that
taking on a substantially related matter against a former client creates a
malpractice cause of action against the lawyer.
Lawyer Fee
Auditor Attempts to Oppose Former Audit Client. Ehrich
v. Binghamton City School District, 210 F.R.D. 17 (N.D.N.Y.
2002), is unique. A lawyer had a side business conducting
audits of legal fees. He did this for the defendant school
district. After he ceased doing this for the school district, he
attempted to handle a case adverse to the district. The court
disqualified him because he had audited the legal fees for this very case.
City
as Former Client; Changed Administrations. Valdez v. Pabey,
2005 U.S. Dist. LEXIS 38311 (N.D. Ind. Dec. 27, 2005). Law firm
represented city for many years. When mayors changed, the law firm was
out. Law firm then attempted to represent plaintiffs against the
city. The court said that the new administration would have a different
approach to issues. Therefore, it was unlikely that the law firm would
have learned anything while representing the city that would be prejudicial to
the city in this case.
Suit for Fees not Substantially Related to Underlying Action. In Lankler Siffert & Wohl, LLP v. Rossi,
287
F. Supp. 2d 398 (S.D.N.Y. 2003),
aff’d.
2005 U.S. App. LEXIS 5471 (2d Cir. April 4, 2005), the plaintiff law firm (“LSW”) represented Rossi in a criminal case.
LSW used several consulting firms in the case.
When Rossi failed to pay LSW or the consulting firms, LSW filed a
collection action on its own behalf and on behalf of the consultants.
Rossi moved to disqualify LSW from representing the consulting firms.
The court denied the motion, holding that the matters were not
substantially related. For another similar holding in a case arising out
of the same criminal case, see FTI Consulting, Inc. v. Rossi,
2004 U.S. Dist. LEXIS 2860 (S.D.N.Y. Feb. 25, 2004).
Good Discussion
of Test in New York. Hickman v. Burlington Bio-Medical Corp.,
371 F. Supp. 2d 225 (E.D.N.Y. May 17, 2005).
S.C. Op. 05-05
(February 2005) holds that a lawyer who represented the purchaser of home
cannot later represent the homeowners’ association in attaching a lien to
the former client’s home.
Court Construes "Personally and Substantially" Test in Rule 1.11(a)
(Former Government Lawyer Rule). Franklin v. Clark, 454 F. Supp. 2d 356 (D. Md. 2006).
Lawyer Had Never Handled Hearing Loss Cases for His Former Client.
Best v. BNSF Ry. Co., 2008 U.S. Dist. LEXIS 5640 (Jan. 10, 2008).
Substantial Relationship and Sewer Service.
Shawnee Associates, L.P. v. Village of Shawnee Hills, 2008 Ohio App.
LEXIS 391 (Ohio App. Feb. 4, 2008).
Follow
the Assets. Hoelscher v. Baggett, 2008 U.S. Dist. LEXIS
30713 (W.D. La. April 15, 2008). Prior
to this action Lawyer represented Plaintiff personally in the purchase of
business assets (“the Assets“). Plaintiff
transferred the Assets into a company Plaintiff formed with a defendant in this
case (Defendant). In this case
Plaintiff claims Defendant wrongfully transferred the Assets to yet another
business. Defendant’s law firm
(“Law Firm”) in this case employs Lawyer.
For that reason Plaintiff moved to disqualify Law Firm.
In this opinion the district judge affirmed the magistrate judge’s
denial of the motion. The court
held that the earlier representation was only superficially related to this
case.
D.C. Op. 343 (Feb.
2008). This opinion discusses the
extent to which a precisely defined and limited engagement with Client No. 1 can
save a lawyer from disqualification in a later representation against Client No.
1 on behalf of Client No. 2.
What is “Materially
Adverse”?
For a lawyer to
run afoul of Model Rule 1.9(a), the new matter must be “materially adverse”
to the former client. Obviously,
taking on a litigation matter against the former client is being materially
adverse. But, what about taking on
a new matter against a third party (not against the former client), the result
of which, if you are successful, will somehow harm the former client.
There is not
much authority on what is “materially adverse.”
Before the changes to the Model Rules in 2002-2003, Comment [1] to Rule
1.9 contained this sentence:
The principles in Rule 1.7 determine whether the
interests of the present and former clients are adverse.
Rule 1.7 uses
the term “directly adverse.” One
might conclude from the quoted sentence that “materially adverse” is the
same as “directly adverse.” In
ABA Op. 99-415 (1999) (dealing with former in-house lawyers being adverse to
their former employers) the Committee seemed to conclude as much.
That was also the conclusion in Simpson Performance Products, Inc. v.
Robert W. Horn, P.C., 92 P.3d 283 (Wyo. 2004), a rare and thoughtful opinion
attempting to deal with the phrase “materially adverse” as used in Ruled
1.9. What the court failed to note
was the deletion of the quoted sentence from Comment [1] by the ABA House of
Delegates a year or so prior to the court’s opinion.
Obviously, the Wyoming version of Comment [1] had not changed, and,
according to the Wyoming court Web site, still has not changed.
We attempted to
find out from those close to the Ethics 2000 project why the sentence in
question was deleted. Our contacts could not recall.
The “legislative history” at the ABA Web site does not mention the
change. One academic, for whom we
have great respect, and who also has no recollection, said as follows:
[M]y own view is that “directly adverse” [used in
Model Rule 1.7] is a much stricter standard.
Keep in mind that “directly adverse” conflicts trigger an
obligation not to take a position so far adverse to your own client that it
would significantly undermine the client’s ability to trust you, regardless
what effect it might have on the matter in which you are representing the
client. “Materially adverse”
under 1.9 means that there is a significant risk that the client information
you have could be used in a manner that would harm that client.
We will adopt that distinction until a better one comes
along.
A
number of cases have dealt with the “adversity” feature of Rule 1.9, but not
with the care or precision of the Wyoming Supreme Court in Simpson
Performance. In some cases, the
court does not even mention its own version Rule 1.9.
Other cases predate the Model Rules or have ethics rules without an
analogue to Rule 1.9. Yet, they
manage to deal with the need for some sort of adversity for the rules on former
clients to engage. Here are the
ones, of which we have knowledge: Admiral Ins. Co. v. Heath Holdings USA,
Inc., 2005 U.S. Dist. LEXIS 16363 (N.D. Tex. Aug. 9, 2005); In re Jones
& McClain, LLP, 271 B.R. 473 (W.D. Pa. 2001); SIPA
Protection Corp. v. R.D. Kushnir & Co., 246 B.R. 582 (N.D. Ill. 2000); McPhearson
v. Michaels Co., 117 Cal. Rptr. 2d 489 (Cal. App. 2002) (Cal. Rule 3-310(E)
just says “adverse”); Fiddelman v. Redmon, 623 A.2d 1064 (Conn. App.
1993); Jerry Lipps, Inc. v. Postell, 229 S.E.2d 78 (Ga. App. 1976); In
re Estate of James M. Ragen, Jr., 398 N.E.2d 198 (Ill. App. 1979); Adoption
of Erica, 686 N.E.2d 967 (Mass. 1997); In re Epic Holdings, Inc., 985
S.W.2d 41 (Tex. 1998) (Texas’ version of Rule 1.9 just says “adverse”); State
of West Virginia v. Hamilton, 430 S.E.2d 569 (W. Va. 1993).
"Accommodation Client."
This is an expression that appears in a series of cases where the courts did not
believe that slavish adherence to the substantial relationship test did real
justice. They had several aspects in common. Each involved a
multiple representation, in which one client was a substantial, long-standing
client, the "primary client," and the other was temporary, the
"accommodation client." The nature of the cases was such that
the accommodation client would have no expectation that anything the lawyer
learned from the accommodation client would not be shared with the primary
client. As noted above, the expectation of confidentiality is usually the
rationale for application of the substantial relationship test.
This concept is discussed in the Restatement
at § 132, Comment i. The Reporter's Note to cmt. i lists
the following cases, in which the courts applied some form of the
"accommodation client" theory: Allegaert v. Perot, 565 F.2d 246
(2d Dir. 1977); American Special Risk Ins. Co. v. Delta America Ins. Co.,
634 F. Supp. 112 (S.D.N.Y. 1986); E.B. Marks Music. Inc., 558 F. Supp. 57
(S.D.N.Y. 1983); and Anderson v. Pryor, 537 F. Supp. 890 (W.D. Mo. 1982).
One case that post-dates the Restatement, in which the court
refused to apply the "accommodation client" distinction was Universal Studios, Inc. v. Reimerdes, 98 F. Supp.
2d 449 (S.D.N.Y. 2000). It distinguishes Allegaert, but does
not mention the other cases noted above. Another recent case that adopts
the Allegaert approach and cites the Restatement is In re
Rite Aid Corp. Securities Litigation v. Grass, 139 F.
Supp. 2d 649 (E.D. Pa. 2001).
Other cases following the Allegaert
approach are Travelers
Cas. & Sur. Co. of Amer. V. Claude E. Atkins Enterprises, Inc., 2006
U.S. Dist. LEXIS 93189 (E.D. Cal. Dec. 11, 2006); Ello v. Singh, 2006 U.S. Dist. LEXIS 55542 (S.D.N.Y. Aug. 7, 2006); Frontline
Communications Int’l., Inc. v. Sprint Communications Co. L.P., 232 F.
Supp. 2d 281 (S.D.N.Y. 2002); Skidmore v Warburg Dillon Read LLC, 2001
U.S. Dist. LEXIS 6101 (S.D.N.Y. 2001); Host Marriott Corp. v. Fast Food Operators, 891 F. Supp.
1002 (D.N.J. 1995); Bagdan v. Beck, 140 F.R.D. 660 (D.N.J. 1991); Kempner
v. Oppenheimer & Co., 662 F. Supp. 1271 (S.D.N.Y. 1987); In re
Zimmerman, 81 B.R. 296 (E.D. Pa. 1987), Rymal v. Baergen, 686
N.W.2d 241 (Mich. App. 2004) (although not mentioning Allegaert
or the "accommodation client" rubric; plus possession of confidences
from "former client" might have disqualified the law firm); and Meyers v. Lipman, 726
N.Y.S.2d 547 (N.Y. App. June 19, 2001). A similar case that preceded Allegaert
by one year is Levin v. Ripple Twist Mills, Inc., 416 F. Supp. 876 (E.D.
Pa. 1976).
The following
cases either explicitly, or by implication, reject the Allegaert
approach: Securities Investor Protection Corp. v. R.D. Kushnir & Co.,
246 D.R. 582 (N.D. Ill. 2000); Koch v. Koch Ind., 798 F. Supp. 1525 (D.
Kan. 1992); and Casco Northern Bank v. JBI Associates Ltd., 667 A.2d 856
(Me. 1995).
G. D. Mathews & Sons Corp. v. MSN Corp., 763 N.E.2d 93 (Mass. App. 2002). The disqualified law firm tried to make an
accommodation client argument, but did so only in a footnote in its brief.
The court was unimpressed and rejected the argument without discussing it.
Parties Reversed. In Ucar
Int'l. Inc. v. Union Carbide Corp., 2002
U.S. Dist. LEXIS 21766 (S.D.N.Y. November 8, 2002), a lawyer for the
"principal" client joined the firm now representing the
"accommodation" client. His new firm, in the face of a motion to
disqualify, argued that the "principal" client would have had not
expectation of confidentiality when the parties were aligned. Not so, said
the court, who disqualified the new law firm.
Parties in Prior Case on
Equal Footing. Goldfarb v. Kuhl, Ct. of Common Pleas, Philadelphia County, 1st
Jud. Dist. of Pa., No. 1825 (Oct. 24, 2005).
A family-owned business originally had three owners, A, B, and C.
They had a falling out, and, in a case prior to this case, C sued A and
B. Law firm X represented A and B.
That case settled with A and B buying out C.
Firm X had no further involvement with A.
A and B subsequently had a falling out, and A sued B (this case).
Firm X appeared for B. A
petitioned the court to enjoin X from representing B.
The court denied the petition, holding that, while this case is
substantially related to the prior case, A had no expectation in the prior case
that X would not share all A’s information with B. This is the rationale
for the "accommodation client" cases, except that here, A and B
appeared to have been on equal footing in the earlier case insofar as X's
representation of them was concerned. The author will keep this opinion in
a PDF file. Anyone wanting a copy need only E-mail him at
william_freivogel@ars.aon.com.
Law Review.
For an excellent and concise discussion of some of these cases, see Douglas
R. Richmond, Accommodation Clients, 35 Akron L.
Rev. 59 (2001).
The "Playbook View" of the Substantial Relationship Test
We are borrowing terminology used by Professor Charles Wolfram in his outstanding
article cited above. Those familiar with materials published by Attorneys'
Liability Assurance Society have seen the phrase "unique insights" to
describe the same concept. The issue is when does a lawyer learn enough
about the former client's thought processes and procedures that the new
representation may be deemed "substantially related" to the former
one.
Outside Counsel -
Not Disqualified. In the following cases the courts held that knowing
about how a former client thinks or approaches litigation is not enough to fall
within the substantial relationship test. Duncan v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 646 F.2d 1020 (5th Cir. 1981); Vincent v. Essent Healthcare of Conn.,
465 F. Supp. 2d 142 (D. Conn. 2006)
(in context of OB/GYN
malpractice cases); Mardian
Equip. Co. v. St. Paul Ins. Co., 2006 U.S. Dist. LEXIS 14517 (D. Ariz. March
28, 2006) (total rejection of playbook approach); Pepper
v. Little Switzerland Holdings, Inc., 2005 U.S. Dist. LEXIS 14453 (D.V.I.
July 6, 2005) (follows Brice; see below); Arctic Cat, Inc. v. Polaris Industries Inc., 2004 U.S. Dist. LEXIS
25463 (D. Minn. Dec. 20, 2004) (patent infringement case involving different
technoloogy); S.D.
Warren Co. v. Yale Industrial Products, Inc., 302
F. Supp. 2d 762 (W.D.
Dist. Mich. 2004) (excellent analysis of concept in products liability
context); Spinner v. City
of New York, 2003 U.S. Dist. LEXIS 14854 (E.D.N.Y. August 27, 2003) (used to
defend strip search cases, now suing); Secureinfo
Corp. v. Bukstel, 2003 U.S. Dist. LEXIS 12189 (E.D. Pa. July 10, 2003) (same
kinds of matters); Briggs
v. Aldi, Inc., 218
F. Supp. 2d 1260 (D. Kan. 2002)
(sex discrimination cases
involving different stores in different cities and no central
management); Hampton
v. Daybrook Fisheries, Inc., 2001 U.S. Dist. LEXIS
19028 (E.D. La. 2001); Brice v.
Hess Oil Virgin Islands Corp., 796 F. Supp. 193 (D.V.I. 1990); Int'l.
Paper Co. v. Lloyd Manufacturing Co., Inc., 555 F. Supp. 125 (N.D. Ill.
1982); Westinghouse Elec. Corp. v. Rio Algom, Ltd., 448 F. Supp. 1284
(N.D. Ill. 1978), aff'd., 580 F.2d 1311, 1322 (7th Cir.), cert. denied,
439 U.S. 955 (1978); In re: Chantilly Construction Corp., 39 B.R. 466
(E.D. Va. 1984); Amparano v. Asarco, Inc.,
93 P.3d 1086 (Ariz. App. 2004); Ex parte Regions Bank, 914 So. 2d 843 (Ala. 2005); 2004 Ariz. App. LEXIS 83 (Ariz. App. June 16, 2004);
Schapiro
v. Morgan Creek Productions, Inc., 2001 Cal. App. LEXIS 3318 (Cal. App.
December 13, 2001) (former labor work not substantially related to employment
contract dispute); Freiburger v. J-U-B Engineers, Inc., 111 P.3d
100 (Ida. 2005); Doe
v. Chand, 781
N.E.2d 340 (Ill. App. 2002);
State ex rel. Wal-Mart Stores, Inc. v. Kortum, 559
N.W.2d 496 (Neb. 1997) ("routine slip and fall cases"); Reem
Contracting Corp. v. Resnick Murray St. Associates, 843 N.Y.S.2d 3 (N.Y. App.
2007) (nothing confidential about enforcing
construction liens); Bloom v. St.
Paul Travelers Cos., Inc., 806 N.Y.S.2d 692 (N.Y. App. 2005); (working on different insurance policies); In re Drake,
195 S.W.3d 232 (Tex. App. 2006); Houghton
v. State of Utah, 962 P.2d 58
(Utah 1998) (Utah has unique version of MR 1.9(a) - "a substantially factually
related matter"); State
ex rel. Ogden Newspapers, Inc. v. Wilkes, 566
S.E.2d 560 (W. Va. 2002) (nine years had elapsed since prior representation, and the law had
changed greatly).
Outside Counsel -
Disqualified. In the following cases lawyers or law firms were
disqualified because of the insights they had gained while working for a former
client. The courts focus on concepts such as "attitudes,"
"litigation philosophy," "procedures,"
"strategies," "policies," and the like. Frequently,
the former relationship had been lengthy. Moreover, the courts emphasized
the nature of confidential information the lawyer had gathered. The courts
deal with confidences in different ways. Many say that there is a
presumption that the lawyer has learned confidences from the former client or
has shared former client confidences with his or her entire law firm. Some
say either or both presumptions are irrebuttable. Some apply the
appearance of impropriety standard, which is no longer part of the ethics rules
of all but a handful of states. In short, while this list is a starting
point, there is no substitute for doing your own research and reading each
case. In re: Riles, 2000 U.S. App. LEXIS 20186 (Fed. Cir. 2000); In
re: Corrugated Container Antitrust Lit., 659 F.2d 1341 (5th Cir. 1981)
(appearance of impropriety); Murphy v. Simmons,
2008 U.S. Dist. LEXIS 594 (D.N.J. Jan. 3, 2008) (thorough analysis of playbook);
Ali v. American Seafoods Co., LLC, 2006 U.S. Dist. LEXIS 29880 (W.D.
Wash. May 15, 2006); Panebianco v. First Unum Life Ins. Co., 2005
U.S. Dist. LEXIS 7314 (S.D.N.Y. April 27, 2005) (same players as in Lott
and Battagliola following); Lott v. Morgan Stanley Dean Witter & Co.
Long-Term Disability Plan, 2004 U.S. Dist. LEXIS 25682 (S.D.N.Y. Dec. 23,
2004) (lawyer formerly defended long-term disability claims for carrier - cannot
represent plaintiff against same carrier in long-term disability claim); Battagliola v.
Nat. Life Ins. Co., 2005 U.S. Dist. LEXIS 650 (S.D.N.Y. Jan. 19, 2005) (same
players as in Lott; court said screen would work); Edwards v. Gould Paper Corp., 2005 U.S. Dist. LEXIS 849 (E.D.N.Y.
January 18, 2005) (very similar to Lott, just above); Engineered
Products Co. v. Donaldson Co., 290
F. Supp. 2d 974 (N.D. Iowa 2003) (appearance of impropriety and presumption that lawyer learned confidences
"not rebuttable.").
Volkswagen
Aktiengesellschaft v. Novelty, Inc., 247
F. Supp. 2d 1076 (S.D. Ind. 2003) (trademark infringement work for VW, then against
VW); Safe-T-Products,
Inc. v. Learning Resources, Inc., 2002 U.S. Dist. LEXIS 20540 (N.D. Ill.
October 24, 2002); Mitchell v. Metropolitan Life Ins. Co., 2002 U.S. Dist. LEXIS 4675 (S.D.N.Y. 2002); Colorpix Sys. of Am. v. Broan Mfg. Co.,
131 F. Supp. 2d 331 (D. Conn. 2001) (same kinds
of cases and working with same in-house lawyer); Superguide Corp. v. DirecTV Enterprises
Inc., 141 F. Supp. 2d 616 (W.D.N.C. 2001); Smith &
Nephew. Inc. v. Ethicon, Inc., 98 F. supp. 2d 106 (D. Mass. 2000); Loomis v. Consol. Stores Corp., 2000
U.S. Dist. LEXIS 12391 (S.D.N.Y. 2000); Est. of Jones v. Beverly Health and
Rehabilitation Services, Inc., 68 F. Supp. 2d 1304 (N.D. Fla. 1999); Cardona
v. General Motors Corp., 942 F. Supp. 968 (D.N.J. 1996); Hammond v.
Goodyear Tire & Rubber Co., 933 F. Supp. 197 (N.D.N.Y. 1996); Contant
v. Kawasaki Motors Corp., 826 F. Supp. 427 (M.D. Fla. 1993); Morrison
Knudsen Corp. v. Hancock, Rothert & Bunshoft, LLP, 81 Cal. Rptr. 2d 425
(Cal. App. 1999); Franco v. Toyota Motor Sales, Inc., 1995 Conn. Super.
LEXIS 3509 (Conn. Super. 1995); Crawford W. Long Mem. Hosp. v. Yerby, 373 S.E.2d 749
(Ga. 1988); Chrispens v. Coastal Refining & Marketing, Inc., 897 P.2d
104 (Kan. 1995); Mid-States Building Services, Inc, vs. Richfield Senior Housing, Inc.,
2002 Minn. App. LEXIS 1066 (Minn. App. September 17, 2002); In re Carey,
89
S.W.3d 477 (Mo. 2002); Gray v. Commercial Union Ins. Co., 468 A.2d 721 (N.J.
App. 1983); Majestic Steel Service, Inc. v. Disabato, 1999 Ohio App.
LEXIS 4919 (Ohio App. 1999); Texaco, Inc. v. Garcia, 891 S.W.2d 255 (Tex.
1995); Skjerpen v. Johnson, 2007 BCSC 1290
(CanLII) (B.C. S. Ct. Aug. 8, 2007).
In In re: A&T
Paramus Co., Inc., 1999 Bankr. LEXIS 1841 (D.N.J. 1999), the court
recognized that knowledge of "litigation strategy, methods and procedures
for defending claims" can fall within the substantial relationship test,
but found that the lawyer had not gained enough information to warrant
disqualification.
Jessen v. Hartford Cas. Ins. Co.,
3
Cal. Rptr. 3d 877 (Cal.
App. 2003). James Wilkins
is attempting to represent the plaintiff in a coverage action against Hartford.
Until 1992 Wilkins, at another firm, had represented Hartford in coverage
disputes in approximately 20 different matters.
Hartford moved to disqualify Wilkins in this case.
The trial judge denied the motion because similar motions by Hartford
against Wilkins had been denied in two federal district court cases.
Thus, the trial court held, Hartford was estopped from making the motion
in this case. The appellate court
reversed, for reasons, it said, contained in an “unpublished portion” of its
opinion. (The portion is indeed
unpublished; it does not appear at all.) The
appellate court remanded the case to the trial court with directions “to
rehear the motion and, in doing so, to apply the substantial relationship
test.” For some reason, not at
all clear from the opinion, the appellate court felt compelled to describe at
great length the nature of the substantial relationship test in California.
For another case involving Wilkins and his disqualification, see Farris
v. Fireman’s Fund Ins. Co.,
14 Cal. Rptr. 3d 618 (Cal. App. 2004).
More on Jessen. Fremont Indem.
Co. v. Fremont Gen. Corp., 49 Cal. Rptr. 3d 82 (Cal. App. 2006). Extensive discussion of the substantial
relationship test and applicability of Jessen v. Hartford Cas. Ins. Co., 3 Cal. Rptr. 3d 877 (Cal. App.
2003).
Lawyer/Testifying
Expert Treated Like Lawyer, and Playbook Analysis Applied. Brand v. 20th Century Ins. Co.,
21 Cal. Rptr. 3d 380 (Cal. App. 2004). Helen Brand sued her
insurance company in a coverage dispute. She
hired lawyer Barry Zalma as an expert witness on insurance coverage issues.
Twelve years prior Zalma had represented the insurance company on
coverage and related matters. The
insurance company moved to disqualify Zalma as Brand’s expert witness.
The trial court denied the motion. In
this opinion the appellate court reversed, finding a substantial relationship
between what Zalma had done for the insurance company and the issues in this
case.
Former In-House
Lawyers - ABA Op. 99-415 (1999). This opinion says that the mere fact a
lawyer was in a company's law department does not mean that the company was a
former client for all matters that were pending when the lawyer was there.
Nor, does the fact that the lawyer had overall supervisory responsibility over
lawyers who were representing the company mean that the company is a former
client. If the lawyer was involved to the extent that the company would be
deemed a client on that matter, the lawyer can later cure any conflict with
consent of the company under Rule 1.7(a). If such a consent requires the
lawyer to maintain confidences that relate to the new representation, the lawyer
will also have to consider obtaining a Rule 1.7(b) consent from the new
client. The opinion also reminds readers that the lawyer may have obtained
confidences at the company requiring the lawyer's (and the lawyer's new law
firm) to be disqualified under Rule 1.9(b). (As to the ability to avoid
the firm's disqualification with a screen, see the section entitled, "Changing
Firms - Lawyers and Non-Lawyers.") The following state ethics
opinions are in accord with ABA Op. 99-415: Ariz. Op. 94-06 (1994); N.J. Op. 654
(1991); and Va. Op. 1399 (1991). But, see Mich. Op. RI-35 (1989).
Former In-House Lawyers
Disqualified. NCK Org. Ltd. v. Bregman, 542 F.2d 128 (2d
Cir. 1976); Chugach Elec. Assoc. v. United States Dist. Ct., 370 F.2d 441
(9th Cir. 1966); Henry v. Delaware River Joint Toll Bridge Commission,
2001 U.S. Dist. LEXIS 13462 (E.D. Pa. 2001); Hyman Cos.,
Inc. v. Brozost, 964 F. Supp. 168 (E.D. Pa. 1997); Prisco v. Westgate Entertainment, Inc., 799 F. Supp. 266
(D. Conn. 1992); Webb v. E.I. Du Pont De Nemours & Co., Inc., 811 F.
Supp. 158 (D. Del. 1992); Ullrich v. Hearst Corp., 809 F. Supp. 229 (S.D.N.Y.
1992); Stitz v. Bethlehem Steel Corp.,
650 F. Supp. 914 (D. Md. 1987) (former in-house lawyer familiar with company
personnel policies could not handle age discrimination case against company); Global Van Lines, Inc. v. Superior Court, 192 Cal. Rptr. 609 (Cal.
App. 1983); Franzoni v. Hart Schaffner & Marx, 726 N.E.2d 719 (Ill.
App. 2000). Mich. Op. RI-35 (1989) (with company many years and formerly on
board of directors).
Former In-House
Lawyer not Disqualified. Caldwell-Gadson
v. Thompson Multimedia, SA, 2000 U.S. Dist. LEXIS 16087 (S.D. Ind.
October 11, 2000). Plaintiff sued several companies for copyright
infringement and plagiarism. Her husband, who was formerly Senior Patent
Counsel for one of the defendants now represents her. The defendants moved
to disqualify the husband under the substantial relationship test of Rule
1.9(a). The court held that although the husband had worked on similar
matters while with the defendant, he had not worked on that matter and
denied the motion.
The court said:
This case is much like the example given in the comment to Rule 1.9:
"[A] lawyer who recurrently handled a type of problem for a former client
is not precluded from later representing another client in a wholly distinct
problem of that type even though the subsequent representation involves a
position adverse to the prior client."
To the same effect, see Jamaica Pub. Serv. Co. v. AIU Ins. Co,
684 N.Y.S.2d 459 (N.Y. 1998). In Wisdom
v. Philadelphia Housing Authority, 2003 U.S. Dist. LEXIS 2055 (E.D. Pa. Feb. 12, 2003),
the issue was whether the plaintiff had sent her complaint letter on time, so
the court was not impressed that the lawyer had gained knowledge of the former
client's approach to handling complaints. In Jordan v. Philadelphia Housing Authority, 337 F. Supp. 2d 666 (E.D. Pa.
2004), the former in-house lawyer got disqualified
because he tried to use an earlier case he had handled for the Authority in this
case.
Ethics Opinions Finding no
Conflict. Ariz. Op. 94-06 (1994); Ind. Op. 3 (1991); N.J. Op. 654
(1991); Va. Op. 1399 (1991).
Not Disqualified, but Unique Facts. Walker
v. State of Louisiana, 817 So. 2d 57 (La. May 15, 2002).
For ten years, until 1999, Daniel Vidrine worked in the “Road Hazard
Section” of the Louisiana Attorney General’s Office.
When he went into private practice, he sent letters to “various
Louisiana attorneys” saying that he was:
. . . very informed in the inner operations of the Department of
Transportation and Development as well as the location of valuable written
documents which are essential in proving a case against the DOTD.
Shortly after
leaving the state, Vidrine took on a highway case for a plaintiff against the
state. The court denied the state's motion to disqualify Vidrine, because
the state had not shown that Vidrine had any confidential information relating
to this particular case. The court said that merely handling the same type
of case as that he had handled while with the state was not enough to disqualify
him.
Vivid Articulation of Playbook Analysis. Hurley v. Hurley, 923 A.2d
908 (Me. 2007)
. Wife
hired Lawyer to represent her to recover her damages resulting from an
automobile accident. After that
case concluded, Husband hired Lawyer to represent him in a divorce proceeding
against Wife. Wife moved to
disqualify Lawyer, the trial court granted the motion, and in this opinion the
supreme court affirmed. In addition
to noting that Lawyer learned about Wife’s health and earnings history, the
court said:
[F]or over two years
[Lawyer] observed [Wife’s] reaction to the numerous tribulations of the
litigation process. [Lawyer] personally observed: [Wife’s] ability to
testify under oath, her reactions to her adversary, her patience with the
protracted process, her ability to accept compromise, her ability to handle
stress, and the way in which she relates to her attorney. Disclosing knowledge
of [Wife’s] strengths and weaknesses in these areas would be detrimental to
her interests in another litigation, particularly in a contentious divorce
action.
Former Outside
General Counsel Not Disqualified. Guzewicz v. Eberle, 953 F.
Supp. 108 (E.D. Pa. 1997).
Nursing Home Neglect Cases Different from Product Liability Cases. Health Care and Retirement Corp. of Amer., Inc. v
Bradley, 961 So. 2d 1071
(Fla. App. 2007).
Lawyer had represented a nursing home chain for more than three years.
Many of those cases (none of them this case) involved pressure ulcers and
falls, as does this case. Lawyer
has joined Law Firm, which has sued that same nursing home chain in a case (this
case), which involves pressure ulcers and falls.
The trial court denied a motion to disqualify lawyer, and in this opinion
the appellate court affirmed (denied cert.).
The court distinguished an earlier case in which a lawyer had defended a
certain type of lawnmower and later sued the manufacturer involving the same
type of lawnmower.
Here, [Lawyer] handled a
"type of problem" for Manor Care-negligence cases involving patients
who suffered from pressure ulcers or falls; the current case, filed after
[Lawyer] left [his prior firm], is a "wholly distinct problem of that
type." Rules Reg. Fla. Bar 4-1.9 cmt. (2006). Unlike two products
liability cases involving the identical product, each negligence case turns on
its own facts. Therefore, the work in this case does not involve [Lawyer]
"attacking [the] work that [Lawyer] performed for the former
client." Id. This lawsuit is not "substantially related"
to the earlier cases within the meaning of Rule 4-1.9(a).
Restatement.
See cmt. d(iii) to § 132, particularly the last paragraph of that
comment.
Treatise.
Hazard & Hodes § 13.7.
Other Cases and Opinions Involving Former Clients
Good discussion of differences between Rules 1.9 and 1.11 and their
applicability to former government lawyers. Babineaux v. Foster, 2005 U.S. Dist. LEXIS 4844 (E.D. La. March 21,
2005).
Different
Offices Successively Handling Related Matters Do not Save Law Firm.
Senior Living Properties LLC Trust v. Clair Odell Ins. Agency LLC,
2005 U.S. Dist. LEXIS 8993 (N.D. Tex. May 13, 2005); and In
re ESM Government Securities, Inc., 66 B.R. 82 (S.D. Fla. 1986).
Mid-States Building Services, Inc, vs. Richfield Senior Housing, Inc.,
2002 Minn. App. LEXIS 1066 (Minn. App. September 17, 2002).
A lawyer had represented a contractor in sixteen different pieces of
litigation against subcontractors. A
year and a half after ceasing to represent the contractor, the lawyer showed
up representing a subcontractor against his former client, the contractor.
The contractor moved to disqualify the lawyer, and the appellate court
affirmed the trial court’s order of disqualification.
University of West Virginia v.
VanVoorhies, 278 F.3d 1288 (Fed. Cir. 2002).
A law firm represented a university in applying for a patent in the name
of a professor. A dispute later
arose between the university and the professor over ownership of the patent.
The law firm appeared on behalf of the university.
The professor moved to disqualify the law firm.
The court held that the nature of the earlier “representation” was
not such to prevent the law firm from being adverse to the professor. Same
result with clear engagement letter, Synergy Tech &
Design Inc. v. Terry, 2007 U.S. Dist. LEXIS 34463 (N.D. Cal. May 2, 2007).
Exterior
Systems, Inc. v. Noble Composites, Inc., 175 F. Supp. 2d 1112 (N.D. Ind. 2001). (This
discussion also appears at the page entitled "Client Mergers/Asset
Sales.") Gillard
and her law firm represented Fabwel, Inc. and its founder, Edward Welter, on
many matters over several years. Among
other things, Gillard drafted the non-competition agreement signed by one of
Fabwel’s executives, Larry Farver. Fabwel
was sold to, and merged into, Exterior Systems, Inc. Farver and Welter later set up another business, which
Exterior claims, among other things, violates Farver’s non-competition
agreement. Exterior sued the
new company, Welter, and two Farvers, including Larry Farver.
Gillard and her firm appeared on behalf of Welter.
Exterior moved to disqualify Gillard and her firm.
The court granted the motion holding that the law firm was being
adverse to a former client (Fabwel, now a division of Exterior) on matters
substantially related to its former representation.
The court was mostly influenced by the fact that the law firm had
drafted the non-competition agreement that was a subject of the lawsuit.
Williams v. Bell, 793 So. 2d
609 (Miss. 2001). Plaintiff sued Defendants in a tort case. The Langston
firm, represented the plaintiff. Defendants went
to the Boackle firm for help because their liability insurance might not be
adequate to cover Plaintiff’s damages. Allred worked at the Boackle firm for
several months. Allred was assigned the task of forming a corporation for the
Defendants and conveying Defendants’ personal assets to the corporation. Allred
then left the Boackle firm and joined the Langston firm. Six months after
Allred joined the Langston firm, the Defendants moved to disqualify the Langston
firm. Allred denied having any confidential information about the lawsuit. The
trial court disqualified the Langston firm. In a 4-3 split, the supreme court
reversed, on two grounds. First, the court held that Allred’s work in
transferring the Defendants’ assets was not substantially related to defending
the lawsuit. Second, the court held that by waiting six months to make the
motion, the Plaintiff waived the right to bring the motion. The three
dissenting justices challenged both findings.
In re Roseland Oil & Gas, Inc.,
68 S.W.2d 784 (Tex. App. 2001).
Suit concerning an oil and gas lease.
A lawyer started out representing all six defendants.
After one of the defendants gave a deposition, the lawyer decided he had
to drop the deponent and the deponent’s wife as clients.
He attempted to remain in the case for the other defendants.
The plaintiffs then moved to disqualify the lawyer.
The court overruled the trial judge and said the lawyer must be
disqualified. The court held that the lawyer may have obtained negative
information from and about his “former clients” and be forced to choose
between maintaining his duty of confidentiality of the dropped clients and his
duty to do the best possible job for his remaining clients.
Discipline.
Florida Bar v. Dunagan, 731 So. 2d 1237 (Fla. 1999). A lawyer was
suspended for 90 days for representing a husband in a divorce matter against the
wife. The lawyer had previously represented both the husband and the wife.
In In
re Capper, 757 N.E.2d 138 (Ind. 2001), an associate of Respondent had
represented the wife in a dissolution proceeding.
Several months after the dissolution, Respondent attempted to represent
the former husband in getting the dissolution decree changed.
When challenged by the former wife’s new lawyer, Respondent withdrew
from representing the former husband. The
court admonished and reprimanded Respondent for that conflict (and for two
unrelated Rule 4.2 violations). In Schwartz v.
Kujawa (In re Kujawa), 270 F.3d 578 (8th Cir.
2001), Schwartz represented Kujawa on several matters.
After they were concluded, Schwartz showed up as counsel for a creditor
in Kujawa’s bankruptcy proceeding. The
Missouri Supreme Court disciplined Schwartz for this.
In this case the Eighth Circuit upheld a $66,000 fee award in
favor of Kujawa and against Schwartz.
Russell v. DiSalvo,
N.Y.S. Ct., QDS: 82456925. This case is reported in the January 12, 2001,
online edition of the New York Law Journal. Neither the opinion nor the article discloses the exact date of the
opinion. A lawyer filed a slip and fall case on behalf of the
plaintiff. The defendant (owner of the premises) had been married to the
lawyer, but the marriage ended some ten years ago. The defendant moved to
disqualify the plaintiff's lawyer. The court granted the motion saying
that the lawyer could use confidences of his former wife, and saying that the
representation gave the appearance of impropriety.
Estate
planning. In Leber Associates, LLC v. The Entertainment Group Fund,
Inc., 2001 U.S. Dist. LEXIS 20352 (S.D.N.Y. 2001), Herrick, Feinstein had done estate planning for the Lebers. The
firm later sought to represent the defendant in a suit brought by a corporation
owned by the Lebers. The Lebers moved to disqualify Herrick, Feinstein.
The court denied the motion. Its principal holding was that the estate
planning was not substantially related to the litigation. To the same
effect, see Friedman v. Kalail, 2002 Ohio App. LEXIS 1509 (Ohio App.
2002) and Benson v. McNutt, 2008 Ga. App.
LEXIS 153 (Ga. App. Feb. 11, 2008).
Former Matter Bankruptcy. In re
Balocca, 151 P.3d 154 (Ore. 2007)
.
Lawyer discipline case. Lawyer
represented A in a bankruptcy matter. Later
Lawyer represented B in a paternity action adverse to A.
The court held that the information Lawyer would have obtained from A in
that representation would disqualify Lawyer from representing B in the paternity
action.
Lewis-Calabrette v. Calabrette, 35 Pa. D. &
C.4th 417 (Bucks County, Common Pleas 1996). Wife was suing husband for
divorce. The husband's lawyer had previously represented the wife on a
variety of business and personal matters, including a prior divorce, estate
planning, and preparation of an ante-nuptial agreement. The court granted
the wife's motion to disqualify, saying:
For the plaintiff to be forced to accept Mr. Litzenberger as
counsel for defendant is to force her to fear that some confidence revealed to
her former attorney may, in ways yet unknown, be used improperly against her.
This she should not have to fear.
Fallacaro v.
Fallacaro, 1999 Conn. Super. LEXIS 947 (Conn. Super. 1999). Husband
sued wife for divorce. The husband moved to disqualify the wife's lawyer
because he had represented the husband eleven years prior in a child support
matter. The court granted the motion because the matters were
"substantially related."
In re Gadbois,
786 A.2d 393 (Vt. 2001). Lawyer represented
husband in first divorce, then opposed husband thirteen years later in second
divorce. Court held the second representation violated Rule 1.9(a).
Bunkers v.
Bunkers, 2005 Ohio App. LEXIS 1206 (Ohio App. March 18, 2005. This is a divorce proceeding.
H moved to disqualify W’s lawyer because that lawyer had represented
H in an earlier divorce proceeding. Many
of the assets involved in the earlier case are involved in this case.
For that reason the appellate court affirmed the trial court’s order
disqualifying W’s lawyer.
In re Hines,
825 N.E.2d 763 (Ill. App. 2005).
This is a “postdissolution-of-marriage proceeding.”
W moved to disqualify H’s lawyer, because he had represented her ten
years prior on matters involving W’s and H’s divorce.
The trial court granted the motion, but the appellate court reversed.
The earlier representation involved marital assets, which were
distributed shortly after that representation.
Thus, the appellate court ruled that the current representation was not
substantially related to the earlier one.
Another Cases
Involving Former Divorce. Duvall v. Bledsoe, 617 S.E.2d 601 (Ga. App. 2005). The court said not substantially
related. Besides the lawyer won't tell because of Model Rule
1.9(c)(1). This the same court that said there were few cases on
substantial relationship. A New York case going the other way is Galanos
v. Galanos, 797 N.Y.S.2d 774 (N.Y. App. 2005).
Mo. Informal Op.
2004-0049 (undated). Lawyer
represented H in a divorce action. Children
were mentioned but custody was not awarded in the divorce action.
H currently has custody. A
third party now wants to hire Lawyer to help obtain visitation rights of the
children. The Missouri Bar Ethics
Counsel opined that the matters are substantially related and that Lawyer
would have a conflict.
Gray v. Gray, 2002 Tenn. App. LEXIS 675 (Tenn. App. September 19, 2002).
A lawyer drafted wills for H and W ten years ago. Now the lawyer is attempting to represent W in a divorce
proceeding against H. H moved to
disqualify the lawyer. The court
made two very interesting rulings. First,
the court held that the fact that the lawyer did not write a termination
letter after the wills were executed did not mean that the lawyer-client
relationship did not terminate. In
that connection, the court was influenced by the fact that the lawyer did
nothing for H for the next ten years. Thus,
H was not a current client of the lawyer.
The court then moved to the substantial relationship test applied in former
client cases. H claims that
because the estate planning ten years prior would have involved the lawyer
knowing about H’s property, it would be substantially related to the
property division issues in this divorce case.
The court disagreed. First,
the court said the property issues would have changed significantly during the
ten years since the wills were done. Second,
the court was influenced by the fact that H and W met with the lawyer
together, and everything H told the lawyer was told in W’s presence.
Ethics opinion. Kan. Op. 02-05 (2002) (Committee said lawyer
could not represent woman seeking estate proceeds where lawyer's partner had
counseled the decedent.)
Canada v.
Hernandez, 193 F. Supp. 2d 409 (D.P.R. March
21, 2002). Plaintiffs are former employees of the Puerto Rican
Department of Education, one of the defendants. Their law firm
represented the Department under a prior administration, and continued on
pending cases several months into the current administration. The
defendants moved to disqualify the plaintiffs' law firm. The court
denied the motion, because the defendants did not make a showing as to what
information the law firm might have gotten during is earlier representation of
the Department.
Md. Op. 2-10
(December 4, 2001). Committee opines that law firm that represented
husband and wife in recent bankruptcy filing could not represent the husband
in a divorce proceeding against the wife.
Crawford v. Antonacci,
746
N.Y.S.2d 94 (N.Y. App. 2002).
Personal injury action.
The accident in this case occurred in 2000.
The plaintiff moved to disqualify the defendant’s law firm, because
it had represented him in a workmen’s compensation matter arising out of a
1987 accident.
In a 2-1 decision the court denied the motion.
The majority noted that the injuries were different and remote in time.
It also noted that all the medical information about the plaintiff
would surface anyway.
The dissent said the fact that both matters involved physical injuries:
implicates
potential confidences, such as whether plaintiff presents his injuries
sincerely or appears as a malingerer, whether he is cooperative in his
treatment and with his counsel, and whether he is able to clearly communicate
the effect of injuries upon his life.
Continental Resources, Inc. v. Schmalenberger, 656
N.W.2d 730 (N.D. 2003). The
plaintiffs’ law firm had previously done title and mineral acquisition work
for defendant. Thus, the
defendant moved to disqualify the plaintiffs’ law firm.
The trial court denied the motion, and the North Dakota Supreme Court
reversed. The court noted that
this case, brought to enforce mineral rights of the plaintiffs, involved
several of the same parcels in which their law firm had assisted the
defendant. Although conceding
that the North Dakota rules no longer recognize the
“appearance-of-impropriety” test, the court declared that the test had not
been abandoned “in spirit,” and relied on the appearance of
“side-switching” as part of its ruling.
Richard B. v. State, 71 P.3d 811
(Alas. 2003). Proceeding
to terminate parental rights. The
lawyer for the mother, Henderson, is the partner of the lawyer, Kay, who once
had represented the father in a criminal matter.
The conviction in the criminal matter is one of the bases for
terminating his parental rights.
The court found the matters substantially related.
Only in Texas. Woolley v. Sweeney, 2003 U.S. Dist. LEXIS
8110 (N.D. Tex. May 13, 2003). Breach of contract case.
Plaintiff and defendant had been business partners.
Now, they are fighting. Defendant’s
law firm has three lawyers who used to be with the law firm that represented
plaintiff and defendant when they were partners (and not fighting).
The magistrate in this case has granted plaintiff’s motion to
disqualify defendant’s law firm. The
opinion is something of an over-long mishmash.
The facts are not clear. Defendant’s
counsel, while purporting to disclose the possible conflict, arguably did not
disclose enough. Thus, the
magistrate held that the waivers plaintiff arguably gave were not knowing. Among other things, the magistrate relies in part on the
“appearance-of-impropriety” test under old ABA Canon 9.
Another factor making the opinion of questionable use – outside Texas,
at least – is Texas’ odd version of ABA Model Rule 1.9.
It provides in a former-client situation a lawyer may not be adverse to
a former client in a matter:
(1) in which such other person
[the current client] questions the validity of the lawyer’s services or work
product for the former client; or . . .
Blue Planet Software, Inc. v.
Games International, LLC, 331 F. Supp. 2d 273 (S.D.N.Y. 2004).
John Kirby filed this action on behalf of plaintiffs, Blue Planet, et
al. against the defendants over the ownership rights to the game, Tetris.
Earlier, Kirby had represented Nintendo in a suit against Tengen, Inc.
over ownership of Tetris. Nintendo
had licensed rights to Tetris from “Soviet Elorg.”
In connection with that license Soviet Elorg had agreed to assist
Nintendo in any disputes with third parties over the ownership of Tetris.
The Nintendo/Tengen litigation was just such a dispute.
Thus, Soviet Elorg opened up its files and records to Kirby.
In this case defendant Elorg USA claims to be a successor in interest
to Soviet Elorg and moved to disqualify Kirby and his law firm Latham &
Watkins. The court granted the
motion. First, the court held
that Kirby had a duty of confidentiality to Elorg USA even though he had never
had a lawyer-client relationship with Soviet Elorg or Elorg USA.
Second, the court held that although the issues in the two cases were
not identical, it would still be necessary to trace carefully the ownership of
Tetris in either case. Thus,
Kirby’s access to Soviet Elorg’s information would give him an undue
advantage over Soviet Elorg’s “alleged” successor, Elorg USA.
Third, while the relationship between Soviet Elorg and Elorg USA was
“not 100 percent clear,” the court felt Elorg USA had better facts than
Kirby did, and the court found that Elorg USA was a successor in interest to
Soviet Elorg. Last, the court
held that Latham, too, must be disqualified.
The court noted that the Second Circuit was skeptical of screens and
found them wanting if “subject to doubt.”
The court held here that a screen would be “bootless” (unavailing)
because Kirby himself was substantially involved in the case.
Chapter 11 court disqualifies lawyer in different proceeding before different
judge. In re Adelphia Communications Corp., 2005 U.S. Dist. LEXIS 2722 (S.D.N.Y.
Feb. 16, 2005). This is a Chapter
11 proceeding. Carla Horn had been
“staff counsel” at Adelphia in Pennsylvania. She was a member of the Pennsylvania Bar but not of the New
York Bar. The Rigas family
controlled Adelphia. After
disclosure of improprieties, various members of the Rigas family resigned as
officers in the spring of 2002. Horn
stayed on until relieved in July 2002. After
the Rigases resignations but while still at Adelphia, Horn sent an inventory of
Adelphia property she had prepared to Timothy Rigas, one of the departed
officers. She also forwarded a
confidential E-mail, which she had received from Adelphia’s new counsel, to a
lawyer representing the Rigases. After
leaving Adelphia, Horn was retained to assist in the defense of the Rigases’
criminal matters in the Southern District of New York.
She did not appear of record in those proceedings.
Nevertheless, Adelphia moved in this Chapter 11 proceeding to disqualify
Horn from working on the criminal matters.
The Bankruptcy judge granted the motion, and in this opinion, the
district judge affirmed. The court
held that because the money funding the criminal defense was, in actuality,
Adelphia’s money, and because the Bankruptcy Court had jurisdiction over all
of Adelphia’s finances, the court had sufficient jurisdiction over Horn to
disqualify her in the separate criminal matters.
The court went on to hold that Horn was in violation of Pennsylvania’s
version of Model Rule 1.9(c) (the use of confidences subsection), relying on the
disclosures to Timothy Rigas and the Rigases’ counsel.
Not
much educational value, but very funny. Rosenthal v. Gordon, 800 N.Y.S.2d 355 (N.Y. Sup. 2005).
This is a real estate dispute. The
plaintiff’s law firm formerly represented the defendant, Gordon, in an
unrelated eviction proceeding, in which Gordon was the plaintiff.
In this case one of the plaintiffs lawyers in a declaration, regarding
his former client, stated the
following:
3. . . . Gordon is . . . notorious for having no scruples and . . . he will
take whatever action is necessary, whether legal or not.
4. . . . I have personally come across Mr. Gordon and his nefarious ways more
than once.
7. As I am familiar with some of Mr. Gordon's escapades,
I can only presume that the threats and illegal acts detailed in the annexed
affidavit of Scott Rosenthal are very true.
(emphasis ours)
Gordon moved to disqualify the plaintiff’s law firm.
The court responded as follows:
Attacks on a party's credibility have particular weight when supported by a
law firm which includes a lawyer who previously represented defendant. In
light of the fact that the credibility of the parties is at issue in this
case, the Court finds that the decision by [plaintiff’s law firm] to vouch
for defendant Nicholas Gordon's lack of credibility is sufficient to merit
disqualification.
Odd California Case. Cal West Nurseries, Inc. v. Superior Court, 29 Cal. Rptr. 3d 170 (Cal. App. 2005).
Lawyer Who Drafted Organizational Documents for Homeowners' Association Cannot
Later Oppose Association where Documents Are Involved. Estright v.
Bay Point Improvement Ass’n., Inc., 921 So. 2d 810 (Fla. App. 2006).
"Freedom
from Apprehension." Columbus Construction Co., Inc. v.
Petrillo Builders Supply Corp., 799 N.Y.S.2d 97 (N.Y. App. 2005). This is a routine
former client/substantial relationship case.
The court found an unremarkable substantial relationship.
The court said the former client did not need to show actual use or
sharing of information from the former representation because the former
client was “entitled to freedom from apprehension and to certainty that
[its] interests will not be prejudiced.”
Bangkok Crafts Corp. v. Capitolo Di San Pietro in Vaticano, 376 F. Supp. 2d 426 (S.D.N.Y. 2005).
The opinion is a bit cryptic as to who is doing what to whom, but here
is our understanding of the relationships.
Plaintiff sued A, B, C, and D. A,
B, and C filed a third-party action against E.
D counterclaimed against Plaintiff and F (who evidently was not a
plaintiff). Initially Lawyer
represented A, B, & C. Lawyer
then withdrew and later appeared on behalf of F (the
non-plaintiff/counterclaim defendant). A,
B, and C (former clients of Lawyer in this case) moved to disqualify Lawyer in
his role as lawyer for F. Because
A, B, and C could not show how F’s interests in the litigation were adverse
to them, the court denied the motion.
Questionable Application of
Irrebuttable Presumption of Information-Sharing. In re Gayken,
2005 Tex. App. LEXIS 4688 (Tex. App. June 16, 2005).
City of
Stockton v. Land Utilization Alliance, 2005 Cal. App. Unpub. LEXIS 6686
(Cal. App. July 29, 2005). The
city sued two not-for-profit entities, X and Y.
Law Firm initially represented both defendants.
X and Y began viewing the case differently.
Therefore, X discharged Law Firm.
Having discharged Law Firm, X moved to have Law Firm disqualified from
representing Y, claiming Law Firm had X’s confidential information.
The trial court granted the motion.
In this opinion the appellate court reversed.
The court based its ruling upon the fact that an organizer and officer
of Y had previously served on the board of X and would have been privy to all
the information X is claiming to be confidential.
Thus, the court said, it would do no good to disqualify Law Firm
because Y would just hire another law firm and disclose the information to the
new firm.
Firm Cannot Represent both Plaintiffs against Corporation if One Plainti