When it comes to potential ethics or malpractice hazards, watch where you’re going, or look out below
Posted Dec 1, 2009 11:39 PM CST
By James Podgers
Note: Register for this month's CLE, "Ethics Pitfalls for Practitioners," from 1-2 p.m. ET on Wednesday, Dec. 16.
The old adage holds that the only sure things are death and taxes, but perhaps one other certainty should be added: The four practice areas that produce the most malpractice claims against lawyers are plaintiffs personal injury; real estate; family law; and estate, trust and probate.
Between them, those four areas accounted for more than 60 percent of the malpractice claims against lawyers reported to the ABA Standing Committee on Lawyers’ Professional Liability for the years 2004-07. The committee has been publishing the Profile of Legal Malpractice Claims every four years since 1985 using data collected from many (but not all) major legal malpractice insurers in the United States.
And in every single one of those reports, the top practice fields for producing claims were—you guessed it—plaintiffs personal injury; real estate; family law; and estate, trust and probate.
A notable aspect of that pattern is that, regardless of size, “all firms seem to make the same types of errors,” said Daniel Pinnington, a speaker at the ABA National Legal Malpractice Conference in September. “People make mistakes, systems break down, in the same way.”
Pinnington, the director of a risk management initiative at Lawyers’ Professional Indemnity Co. in Toronto, moderated a panel on high-risk behavior among lawyers that focused on the “fearsome foursome.” But while the panelists agreed that the general patterns haven’t changed much over the past two decades, a couple of speakers noted that the recession has given a sharper edge to many claims against lawyers.
These days, said Charles S. Levine, vice president-professional liability claims at Liberty International Underwriters in New York City, “plaintiffs are looking for different ways to make money, and one of the things they’re doing is suing their lawyers.”
Lawyer Christine L. Mast noted the same tendency among legal malpractice claimants. “And they’re bringing new creative theories” into play, said Mast, a partner at Hawkins & Parnell in Atlanta who defends against professional malpractice claims.
But even with clients becoming increasingly hungry for recoveries against their lawyers when cases don’t turn out their way, many claims could probably be avoided. Pinnington said a 10-year study of claims handled by his company for lawyers in Ontario indicates that, overall, errors in communication with clients are the leading cause of malpractice claims—followed by discovery, missed deadlines and time mismanagement, and failures to conduct adequate investigations.
The themes sounded by Pinnington and his fellow panelists are echoed in the articles that follow, in which leading experts identify 10 of the pitfalls that await lawyers in a variety of practice areas. At least some of them may bring to mind another familiar adage: “If I told you once, I told you a thousand times ... .”
Illustration: Francisco Caceres
IN A FLUCTUATING REAL ESTATE MARKET, OUTDATED APPRAISALS ARE WORTHLESS
BY PAMELA A. BRESNAHAN
The lawsuit you filed alleges that your client has a claim to a parcel of real property. Whether the case is a divorce, a contract claim or another type of dispute, the worth of the claim turns largely on the value of the real property.
At the outset, you hire an appraiser to set a value on the property. After 10 months of discovery, opposing counsel comes to you with a settlement offer. You sit down with your client and discuss the offer. Ultimately, your client agrees to drop his claim on the property in return for a cash payment, and the suit is dismissed. But a few months later, the property sells for 25 percent more than the amount suggested by your appraiser. It doesn’t take long before the client calls claiming that he got a bad deal in the settlement.
It is important to remember that the settlement of a lawsuit does not terminate an attorney’s exposure to professional negligence claims. Attorneys have been sued, for instance, after recommending settlements without adequately investigating the value of personal injury claims—Consolidated American Insurance Co. v. Hinton, 845 F. Supp. 1515 (M.D. Fla. 1994)—or the value of marital property—London v. Weitzman, 884 S.W.2d 674 (Mo. App. 1994). So it is not an unreasonable extrapolation to expect that, in a case involving the value of real property, a client would sue his attorney for recommending settlement without obtaining the most up-to-date appraisal possible.
Certainly, there was a time when the value of real estate fluctuated little more than a couple of percentage points each year. During the past few years, however, we have witnessed median home prices produce both year-over-year gains and losses exceeding 30 percent.
Accordingly, it may no longer be acceptable for a lawyer to enter into settlement discussions while relying on an appraisal that is a year old or even six months old. Despite factoring market changes into your settlement recommendation, if you only have an old appraisal or outdated sales data or an outdated assessment in your file, you expose yourself to claims of negligence.
Pamela A. Bresnahan is a partner at Vorys, Sater, Seymour and Pease, and heads the litigation practice group at the firm’s office in Washington, D.C. She is a member of the ABA House of Delegates and a past chair of the Standing Committee on Lawyers’ Professional Liability.
THE ETHICS RULE AGAINST COMMUNICATING WITH A REPRESENTED PARTY ISN'T JUST FOR LITIGATORS
BY SCOTT E. WAXMAN
The closing is drawing near. A few signatures, a couple of wires and the conclusion of another successful transaction can be celebrated. Your client—the bank—has calculated the applicable interest rate and asks you to communicate the rate to the borrower, which is represented by another law firm. You pick up the phone and call the borrower’s comptroller. Or maybe the borrower’s comptroller phones you directly to obtain the interest rate.
Each of these scenarios is seemingly benign. But is it ethically permitted for you to speak with the comptroller? The answer is no.
A basic rule of professional responsibility is that a lawyer may not communicate with a party he or she knows to be represented by other counsel about the subject of the representation without the express consent of that party’s counsel. The standard version of this ethics mandate is set forth in Rule 4.2 of the ABA Model Rules of Professional Conduct, which are generally followed by every state but California.
Most attorneys are very familiar with this rule in the context of litigation, but compliance in transactional practices is very sporadic. Comment  to Model Rule 4.2 states that it is designed to protect a represented party “against possible overreaching by other lawyers who are participating in the matter, interference by those lawyers with the client-lawyer relationship and the uncounseled disclosure of information relating to the representation.”
Whether or not one accepts the underlying principle of the rule, that principle is just as applicable in the transactional setting as it is in litigation, and all attorneys are bound by it.
One frequently cited reason for disregarding Rule 4.2 is that it doesn’t apply when a conversation with a represented party is not substantive in nature. But the rule does not distinguish between substantive and nonsubstantive. Under the rule, any communication is prohibited if it relates to the representation and the attorney knows that the person is represented by other counsel.
Another often-cited reason for ignoring the rule is that the represented party personally initiated the contact, as in the second scenario presented. But under Rule 4.2, even a lawyer who did not initiate the contact must immediately terminate communication with a person if, after the communication has commenced, he or she learns (or already knows) that the person is represented in the matter by other counsel.
Just like litigators, transactional lawyers should review the version of Rule 4.2 in effect in their jurisdiction to ensure that they do not violate this often overlooked ethics principle.
Scott E. Waxman is a partner and chair of the business group at Potter Anderson & Corroon in Wilmington, Del.
Illustration: Francisco Caceres
THREATENING LEGAL ACTION IN FEE DISPUTES CAN BLOW UP IN YOUR FACE
BY DIANE L. KARPMAN
A hypothetical: lawyers a and b form an ostensible partnership to aggressively prosecute a client’s major personal injury action against heavyweight defendants. The lawyers agree on an allocation of work and a division of fees. Several years into the litigation, however, they have a falling out. When the case finally settles, the names of both lawyers are on the settlement check. Lawyer A files a state bar complaint against Lawyer B, attempting to coerce B into executing the settlement check and renouncing his interest in the proceeds. B sues A for breach of contract, intentional misrepresentation and extortion.
As shocking as it may seem, clients and lawyers have been known to attempt to manipulate fee disputes by filing, or threatening to file, disciplinary complaints or court actions. Many lawyers believe that informing the other side of the consequences of their conduct is a realistic settlement argument and a legitimate aid in negotiations. But the threat becomes extortion when it involves a secondary proceeding.
The ABA Model Rules of Professional Conduct contain no specific prohibition against threatening criminal or administrative charges to obtain an advantage in a civil matter. The thinking is that such conduct—even though extreme—already is encompassed in other rules.
But some states—California and Maine, for instance—prohibit threats of criminal, disciplinary or administrative agency actions to gain advantage in a civil lawsuit. Even if a jurisdiction’s ethics rules do not specifically forbid such threats, opinions from Arizona, Delaware, Florida, New Mexico, North Carolina and West Virginia—none of which specifically prohibit threats in their legal ethics rules—advise lawyers that threatening or bringing criminal charges to leverage a civil matter implicates disciplinary rules.
There also is a distinction between asserting a lawyer’s own interests rather than those of a client.
In asserting a client’s interests, a lawyer must be free to advance the strengths of the case in a candid and objective manner. This tolerance for lawyers working in a representational capacity does not extend to circumstances where lawyers are advancing their own interests.
In a recent fee dispute case among lawyers in California, one lawyer was acting as “puppetmaster” and filed a state bar complaint under the client’s name. Ruling in Cohen v. Brown, 173 Cal. App. 4th 302 (2009), the state court of appeals held that the lawyer had engaged in an act of extortion.
There is a fine line between vigorous advocacy and threats or extortion, and the states have widely divergent views on where it is. Consider carefully on which side of the line you are standing.
Diane L. Karpman is principal at Karpman & Associates in Beverly Hills, Calif., which represents lawyers in professional conduct matters. She is a member of the ABA House of Delegates, and she represents the association on the editorial board of the ABA/BNA Lawyers’ Manual on Professional Conduct.
Illustration: Francisco Caceres
DUAL REPRESENTATION IS POSSIBLE, BUT NOTE THE ETHICS RISKS
BY EILEEN LIBBY
In most areas of legal practice, dual representation of two (or more) co-clients in a single matter is uncommon—and even frowned upon. With good reason, too, because it’s easy for a lawyer representing two clients in the same matter to run afoul of ethics rules implicating the duty of loyalty to the client and the duty of confidentiality—two of the most important core values of the legal profession.
Immigration law, however, is a key exception. Dual representation frequently occurs in immigration practice because many cases join together the interests of family members or an employer and employee. A lawyer might represent a husband who is helping his wife obtain a green card giving her permanent legal resident status in the United States. Lawyers also are retained by companies seeking to obtain visas or green cards for employees who are foreign nationals. In both scenarios, the interests of the two clients are aligned.
Nevertheless, a lawyer representing both clients in an immigration matter runs the risk of violating the ethics rules against breaching client confidences (Rule 1.6 in the ABA Model Rules of Professional Conduct) or against making false statements to a tribunal (Model Rule 3.3).
In the visa scenario, for instance, a foreign national employee may disclose to the lawyer a criminal history or other information the employee does not want shared with the employer, or the lawyer may learn that the employee has been working illegally for the company in violation of the Immigration Reform and Control Act of 1986. The lawyer may have an ethical duty to inform the employer of its potential liability, but disclosure of the employee’s status could result in termination and possible deportation.
The “simple solution” some lawyers follow when representing employers and alien employees is to treat the employee as a nonclient. But since a lawyer-client relationship can be implied based on the lawyer’s conduct and the putative client’s expectation, this course of action is potentially ineffective and perilous.
Dual representation is ethically possible, but the lawyer must take proper action from the outset of the relationship. That includes making full disclosure to both clients, advising them on what might happen if there is a conflict, and informing them that neither one would be able to claim the attorney-client privilege against the other. If a conflict of interest arises, the lawyer must consult further with the clients and may have to withdraw from representing both of them if neither will consent to waive the conflict.
A lawyer can minimize the ethics risks by considering who is paying fees, the duties owed to the clients, the potential for conflict, what conflicts might not be waivable, what must be done if either client refuses consent to a waiver, and what must be disclosed. The lawyer may be able to get the clients to agree that certain aspects of one client’s activities will remain confidential from the other party. The lawyer also may seek consent to limit the scope of representation pursuant to ABA Model Rule 1.2.
But even with those precautions, the lawyer will be walking a very fine ethics line. The lawyer and clients can only hope the outcome will be worth the risks.
Eileen Libby is associate ethics counsel in the ABA Center for Professional Responsibility.
A WELL-CRAFTED ENGAGEMENT LETTER SAVES TROUBLE DOWN THE LINE
BY NANCY J. GEENEN
Great news—Jane signed up her first commercial client!
Jim called Jane to work on a joint venture proposal with his small technology company. Jim signed an engagement letter that Jane prepared with all the bells and whistles. Jane identified Jim’s company as the client. She detailed the pricing structure for services and included language about payment terms. She received a retainer to be held until the conclusion of the engagement.
Jim agreed to a conflict-of-interest waiver with respect to potential disputes. Jim and Jane discussed the business strategy and the scope of the joint venture. After extensive negotiations, the two companies finalized their agreement, including nondisclosure provisions and technology licenses.
Then Jim started calling Jane for general advice on such issues as employment and trade secret protection. Jane was the company’s lawyer, and she was generating monthly revenue for her firm. Isn’t this good?
Yes, right up until Jim calls Jane, ranting that a competitor is moving into the area and raiding his employees. Jim wants Jane to prevent the loss of company trade secrets.
In the conflict check, however, Jane discovers that her law firm represents the competitor. Her firm acknowledges that it cannot represent either client in their dispute.
The court rules that the noncompete provisions in the employment agreements on which Jane offered general advice are unenforceable. Jim is now suing Jane and her firm for malpractice because she did not advise his company about the most recent court decisions suggesting that the noncompete provisions were unenforceable.
Jane’s problems started with this statement in her engagement letter to Jim: “Thank you for selecting my firm to represent the Company.” From this broad statement, Jim fairly understood that Jane and her firm represented the company in all respects.
Jane should have heeded Rule 1.2 of the ABA Model Rules of Professional Conduct. Rule 1.2(c) states, “A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.” Drafting an engagement letter with specificity helps both lawyer and client understand the scope and term of the legal relationship. Referring generically to “the matter we discussed” leaves too much open to interpretation.
Jane’s engagement letter should have specifically limited the scope of her representation to Jim’s joint venture. As her role as trusted legal counsel expanded, Jane needed to supplement the initial engagement letter with separate letters that limited the representation to specific matters with a description of the work that would be delivered or the duration of the assignment. Each separate engagement letter also should have identified the lawyer with subject matter expertise who would handle each matter.
While matter-level engagement letters take extra time and care to draft, they manage expectations of the client and protect the lawyer from claims for malpractice and breach of loyalty.
Nancy J. Geenen is a partner at the Silicon Valley office of Foley & Lardner in Palo Alto, Calif. She is a member of the firm’s intellectual property litigation, and bankruptcy and business reorganization practices.
Illustration: Francisco Caceres
BE CLEAR ABOUT WHO YOU DON’T REPRESENT
BY LISA L. SHREWSBERRY
In most purchase/sale transactions involving a small business—a restaurant, perhaps, or a gift shop or a car wash—the parties to the transaction have all the details figured out before they ever talk to an attorney. Many times, the parties will go together to one attorney with the simple request to “prepare the paperwork.”
First and foremost, the attorney must explain to the parties why they should each be represented by their own counsel. They need to be reminded that their euphoria about the transaction today does not mean there won’t be some kind of falling out in the future.
Moreover, while it may be allowable for the attorney to represent both parties (after full disclosure), it still is not advisable from the standpoint of a potential legal malpractice claim. Even if an attorney obtains a waiver of any conflict of interest from both parties, the situation still may be fertile ground for a future claim against the attorney. Such waivers, though useful in defending against malpractice claims, will not prevent them, nor are they always dispositive.
Therefore, best practices call for representing one party to the transaction and sending a nonengagement letter to the other party.
Nonengagement letters are crucial, especially if the second party remains unrepresented by counsel, because there is no better manner in which to demonstrate the attorney’s efforts to avoid a conflict situation. In the event of a legal malpractice claim by a nonclient, a nonengagement letter often is the only basis for prevailing in a pre-answer motion to dismiss. Without such a letter, a claim often will proceed into discovery to determine whether the nonclient could reasonably have believed he actually was a client of the attorney.
The scope of an attorney’s duty is just as important as to whom the duty is owed. In the context of the purchase/sale of a small business, an attorney must focus on what he or she has not been retained to do. In other words, best practices call for a clear delineation, in writing, of services to be provided, as well as services not to be provided.
Again, it is quite common for both parties to the transaction to simply request paperwork from the attorney, having already agreed to the terms and conditions of the purchase/sale. Unfortunately, it also is quite common for a small business to fail under new ownership.
Such a turn of events may result in a claim against the attorney for failure to review the financial data, failure to build in protection in any loan agreements or failure to build in protection in a noncompete agreement—to name just a few. A written record of the scope of the attorney’s services makes any such claim easier to defend. Always put it in writing!
Lisa L. Shrewsberry is a partner at Traub Lieberman Straus & Shrewsberry in Hawthorne, N.Y. Her practice areas include professional liability, employment practices liability, and directors and officers liability.
THE END-OF-REPRESENTATION TALK DOESN’T ALWAYS MEAN THE END
BY CHRISTIAN A. STIEGEMEYER
As she has done countless times, the estate planning attorney welcomes her client into the conference room for the signing of a will and trust. As she has done countless times, the attorney gives the client her end-of-representation talk, in which she says that, although her work is completed, periodic review of the client’s estate plan is prudent because important life changes and evolving financial circumstances may require changes or updates—something she would be happy to help with in the future. And as she has done countless times, the attorney hopes the client doesn’t misunderstand the nature of their relationship going forward.
Estate planning attorneys routinely have clients who will need future services directly related to, and potentially affecting, work that was just concluded. How an attorney deals with that reality can either lead to future business from a client or create risks of an unintended, ongoing attorney-client relationship resulting in conflicts of interest or malpractice claims based on unmet client expectations for protection and advice.
A closing letter is a valuable tool in both securing the future business and avoiding the malpractice risks. Reluctance to use such a letter usually arises from a concern that clients will misinterpret it and conclude that the attorney doesn’t want to represent them on future matters.
Unquestionably, drafting an effective closing letter is equal parts art and science.
Experienced estate planning attorneys routinely have an end-of-representation discussion with clients who have just executed their estate planning documents. For such a discussion to be an effective defense in a future dispute about the exact nature of the client-lawyer relationship, however, there must be a written record of what was said. Without it, the status of the relationship could be determined by whether the client’s understanding of the lawyer’s role is reasonable under the circumstances.
In a leading case on this issue, Jones v. Rabanco Ltd., No. C03-3195P (W.D. Wash. Aug. 3, 2006), the court ruled that a three-year break in contact between the attorney and client was not inconsistent with a continuing attorney-client relationship. “Other courts have held that ‘once established, a lawyer-client relationship does not terminate easily. Something inconsistent with the continuation of the relationship must transpire in order to end the relationship,’ ” states the opinion, citing SWS Financial Fund A v. Salomon Bros. Inc., 790 F. Supp. 1392 (N.D. Ill. 1992).
A good way to start crafting a closing letter is to dictate the routine end-of-representation discussion into draft form. The “script” for that discussion likely contains a statement regarding the attorney’s status that has proved to be inoffensive to clients and that can be massaged into an equally inoffensive written confirmation that the attorney’s representation is concluded.
Most important, the letter should not be drafted as a “CYA” document. It is not. It is an important counseling tool containing information clients need to protect their interests. But in doing so, the closing letter can protect the attorney’s interests as well.
Christian A. Stiegemeyer is director of risk management at the Bar Plan Mutual Insurance Co. in St. Louis, which serves lawyers in Missouri, Indiana, Kansas and New Mexico.
LOCAL GOVERNMENT LAW
ETHICS RULES SET BOUNDARIES FOR YOUR RESPONSE TO CASE PUBLICITY
BY MICHAEL DOWNEY
Lawsuits against school districts, municipalities and other government bodies often receive plenty of public attention triggered by statements from plaintiffs counsel and media coverage focusing on the entity’s alleged mismanagement or misconduct. Typically, government officials want to respond with more than a “no comment,” but any response also must not jeopardize the entity’s legal position in the case.
A lawyer representing a government body must recognize that working with the client to develop and present a response is a matter of ethics as well as damage control. See, for example, 1998 N.C. Ethics Opinion 4. But it also helps to know that, at least under the ABA Model Rules of Professional Conduct, there is more leeway to respond to adverse publicity than many lawyers might think they have. (State versions may vary from the Model Rule.)
Trial publicity is addressed in ABA Model Rule 3.6. Rule 3.6(a) generally prohibits a lawyer participating in a matter (as well as other lawyers at the firm or government agency) from making “an extrajudicial statement that the lawyer knows or reasonably should know will be disseminated by means of public communication and will have a substantial likelihood of materially prejudicing an adjudicative proceeding in the matter.”
Model Rule 3.6(b) specifies permissible content for a lawyer’s extrajudicial comment, including the claim, offense or defense involved and—except when prohibited by law—the identity of the people involved, information contained in a public record, schedules for proceedings and the results of proceedings, confirmation that an investigation is in progress, and a request for assistance in obtaining evidence and information relating to a matter.
Comment 5 to Rule 3.6, meanwhile, identifies certain types of content that would likely have prejudicial effect on a proceeding. Most of the prohibitions relate to criminal proceedings, but a key provision with general application covers “information that the lawyer knows or reasonably should know is likely to be inadmissible as evidence in a trial and that would, if disclosed, create a substantial risk of prejudicing an impartial trial.”
A critical provision in Model Rule 3.6 allows a limited “right to respond” when a lawyer or the client did not initiate publicity about the case. Under Rule 3.6(c), a lawyer “may make a statement that a reasonable lawyer would believe is required to protect a client from the substantial undue prejudicial effect of recent publicity not initiated by the lawyer or the lawyer’s client.”
Under those circumstances, the lawyer may respond to publicity initiated by opposing counsel or the media even if, as Comment 7 to Rule 3.6 states, those statements “might otherwise raise a question under this rule.” But any protective responses “should be limited to contain only such information as is necessary to mitigate” the effects of recent adverse publicity.
Model Rule 3.6 provides some room to maneuver when it comes to discussing legal matters in the press. Just watch where you’re going.
Michael Downey is a St. Louis-based partner in the national Lawyers for the Profession practice group at Hinshaw & Culbertson. In the ABA, he is a council member for the Law Practice Management Section.
IF YOU DON’T KNOW IT, DON’T DO IT
BY DAVID L. SASSEVILLE
A wise man knows what he doesn’t know. so it is with wise lawyers—they understand the limits of their own knowledge, and act accordingly.
Rule 1.1 of the ABA Model Rules of Professional Conduct states: “A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.”
The rule seems straightforward enough, but things can get very messy for a lawyer who doesn’t follow it.
Zelig is a general practitioner who won a substantial judgment for Fletcher. A year later, Fletcher asked Zelig for help with his estate plan: “I want to live off the income from my assets and leave the principal to my favorite charity.” Fletcher mentioned that he had a niece for whom he wanted to leave something. Zelig drafted an irrevocable trust agreement using a form he obtained from a lawyer down the hall. It designated the niece as a secondary beneficiary of the trust income. Fletcher transferred all his assets into the trust, relying on Zelig’s assurance that he would not have to pay gift or estate taxes. But under a controlling Treasury regulation—of which Zelig was ignorant—the entire actuarial value of the income portion of the trust—nearly $12 million—was treated as a taxable gift because the trust was irrevocable and because it named the niece as a secondary income beneficiary.
Zelig erred by accepting an engagement requiring more expertise than he possessed. Many lawyers make the same mistake. These errors often lead to disciplinary complaints and liability claims. The worst cases involve severe personal hardship or financial injury to the client. Even when the actual harm to the client isn’t serious, cases often result in fee forfeiture or disgorgement, along with private or public discipline.
A lawyer can provide adequate representation in a wholly novel field through necessary study or through the association of a lawyer of established competence or both. Zelig, for example, could have avoided his dilemma if he had done either of those things.
To avoid Zelig’s pitfall, consider the following steps when undertaking representation in a new or unfamiliar field of law:
Look in the mirror and remind yourself that you don’t know everything.
Ask someone competent in the field and familiar with your practice this candid question: “Do I know enough not to be dangerous?”
If the assistance of experienced co-counsel is not available, refer the matter out.
Never rely on another lawyer’s form unless you know the lawyer is competent in the field and the lawyer has confirmed that the form is suitable for the task at hand.
David L. Sasseville is a loss prevention and claims partner at Lindquist & Vennum in Minneapolis. He is also the firm’s general counsel and chairman of its professional liability/ ethics committee.
LATERAL HIRES CAN BRING ON A LOT OF POTENTIAL CONFLICTS BAGGAGE
BY EDWARD S. CHENG AND JESSICA G. KELLY
The current economic recession has added momentum to the lateral hiring trend among law firms. But a recent federal court ruling highlights a crucial potential pitfall of lateral hiring: Bringing in a lawyer from another firm can create conflicts of interest with the firm’s existing clients and cases.
Rules 1.9 and 1.10 of the ABA Model Rules of Professional Conduct govern conflicts of interest relating to former clients. (The Model Rules generally serve as the basis for professional conduct rules for lawyers in every state except California.)
Rule 1.9(b) provides in relevant part: “A lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client” if the interests of the parties are adverse, and if the lawyer has obtained information protected under Rule 1.9 or other ethics rules that is material to the case at hand.
Model Rule 1.10 extends Rule 1.9’s prohibition to any other lawyer at the potentially conflicted lawyer’s firm unless adequate steps are taken to screen the lawyer from any participation in the case. (At the state level, 24 jurisdictions have adopted the screening provision in Rule 1.10.)
The decision by the U.S. District Court for the District of Massachusetts in O’Donnell v. Robert Half International Inc. (PDF) illustrates the dramatic consequence of failing to take these ethics rules seriously, even when hiring young associates.
In O’Donnell, No. 2004-12719-NMG (Aug. 10, 2009), the court disqualified plaintiffs’ counsel on the eve of trial after five years of preliminary litigation. The defendants had moved to disqualify plaintiffs’ attorneys after they hired an associate directly from the firm that represented the defendants.
The associate’s exposure to the case at her previous firm was limited to information disclosed at practice group meetings, discussions with partners and a single research assignment. Furthermore, her new firm screened her from the case.
Nonetheless, the court concluded that the lawyer had learned too much “substantial material information” about the case. The disqualification forced plaintiffs to obtain new counsel and further postponed a trial of their claims.
Disqualification raises the ante for failing to anticipate and handle conflict-of-interest issues arising from lateral hiring.
As O’Donnell demonstrates, even hiring firms in jurisdictions where screening is permitted can still run afoul of the ethics rules. As a result, a law firm in any jurisdiction is well-advised to evaluate whether a lateral hire will jeopardize the firm’s duties to former and existing clients. Knowing whether a lawyer will bring conflicts-related baggage may influence the hiring decision, or at least require that screening steps be taken from the outset. n
Edward S. Cheng is a partner in the litigation department at Sherin and Lodgen in Boston, and he co-chairs the firm’s professional liability practice group. He is a member of the ABA Standing Committee on Lawyers’ Professional Liability. Jessica G. Kelly is an associate in Sherin and Lodgen’s litigation department.
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