E-Ethics Vol. I, No. I (March, 2001)
(c) 2001 by David Hricik
www.Hricik.com

Conflicts of Interest Arising From Transferring Lawyers and Support Staff

I. Introduction.

There can be no reasonable debate about the fact that mobility among legal professionals is greater than ever. Staff, associates, and even partners create and dissolve relationships with law firms when economics dictate. Further, more often than ever entire law firms merge with other firms and entire departments leave one firm to join another or to form a new entity.

The law governing transferring lawyers and nonlawyers is, however, largely undeveloped. It may be that courts and bar associations will give unexpectedly greater weight to protecting client confidences than to lawyers' need to earn a living by changing firms. Even in large states such as California and Texas, the law is in many respects uncertain. For example, a California appellate court for the first time addressed the question of whether, after a lawyer leaves a firm, the knowledge of the lawyers who remain at that firm is still imputed to the departing lawyer and, if so, whether it is then "re-imputed" to every lawyer at a firm the transferring lawyer subsequently joins.

My own career provides a useful example of the questions that can arise: I left Baker & Botts several years ago. Is the knowledge of other Baker & Botts lawyers gained while representing clients while I was with that firm still imputed to me?

If so, I could not be adverse to a client that some other Baker & Botts lawyer had represented while I was with that firm, even though I know nothing about that representation and, in fact, do not even know that it had occurred. If imputation does not continue once a lawyer leaves a firm, then I could be adverse to that client, even if that other lawyer who had represented that client could not.

Further, suppose I join another law firm. If I am disqualified, is every lawyer in my new firm? Is there anything we can do to prevent that result or reduce the risk to the new firm of hiring me?

Are the answers to these questions any different for transferring nonlawyers?

II. Discussion.

It is beyond the scope of this E-Ethics to address all of the complicated fact patterns that arise in the real world. For example, there are various groups to consider: the lawyer who is leaving; the lawyers who the transferring lawyer may join; the lawyers who remain behind. Further, the ethical rules vary by state (and sometimes between state and federal courts within a state), and occasionally courts apply different prohibitions to each of these groups depending upon the nature of the adverse representation and other facts. The law in California is a good example of how undeveloped and unclear these rules are. In a recent case, Adams v. Aerojet-General Corp., 104 Cal.Rptr2d 116 (Ct. App. Cal. Feb. 7, 2001), a California appellate court examined a fairly simple set of facts, and developed and applied (over a dissenting opinion) an intricate test to apply to transferring lawyers in California. Adams is a lesson in uncertainty. The entire opinion may be found at http://www.courtinfo.ca.gov/opinions/documents/C031323.PDF or, if your e-mail supports html, you should be able to just click here. In Adams, a lawyer left a law firm and transferred to a new firm. A client of the old firm, Aerojet, then sought to disqualify the lawyer and his entire new firm from representing Adams in the suit adverse to Aerojet, even though: (1) the transferring lawyer had not personally represented Aerojet in any related matter while at the former firm; and (2) there was no direct evidence that he had been exposed to its confidential information while at the former firm.

After a lengthy (and in my opinion, sometimes questionable) analysis, the court crafted a new test to apply:

We conclude that disqualification should not be ordered where there is no reasonable probability the firm-switching attorney had access to confidential information while at his or her former firm that is related to the current [adverse] representation. We therefore hold that where there is a substantial relationship between the current case and the matters handled by the firm-switching attorney's former firm, but the attorney did not personally represent the former client who now seeks to remove him from the case...[t]he court's task... is to determine whether confidential information material to the current representation would normally have been imparted to the attorney during his tenure at the old firm. In answering this question, the court should consider any time spent by the attorney working on behalf of the former client and the attorney's possible exposure to formulation of policy or strategy in matters relating to the current dispute. The court should also take into account whether the attorney worked out of the same branch office that handled the former litigation, and/or whether his administrative or management duties may have placed him in a position where he would have been exposed to matters relevant to the current dispute.

(Citations and internal quotation marks omitted).

The court placed the burden on the attorney to prove that he did not possess any such information.

One judge concurred in the result; another judge dissented. He would have placed an extremely high burden on the transferring attorney, requiring him to establish a "prima facie showing that either (1) the prior representation of the opposing party by the attorney's former law firm did not have a substantial relationship to the matters at issue in the current lawsuit, or (2) the nature of the former relationship between the law firm and the opposing party was such that confidential information material to the current dispute normally would not have been imparted to the attorney." Further, he reasoned that the attorney could not establish such a prima facie case "merely by declaring that he or she does not recall having any discussions regarding confidential information about the opposing party while affiliated with the former firm or that the attorney has never received such information."

The fact that this was a case of first impression in California, and the disagreement among the judges as to the burden of proof and other important issues simply illustrates the fact that the law has not kept up with the changes made in modern legal practice -- or that increased mobility has taken place without properly recognizing the limitations that the judiciary may place upon the need for lawyers to change firms in order to make a living, so as to protect legitimate client needs.

The law regarding transferring nonlawyers appears to be a bit more developed in the jurisdictions and more uniform. The Texas Supreme Court has repeatedly addressed the conflicts created by hiring nonlawyers, and has generally followed an approach taken by most jurisdictions: even if the nonlawyer does personally know information that could be used against his former firm's client, the hiring firm is not disqualified if it screens off the nonlawyer from the matterr. Phoenix Founders, Inc. v. Marshall, 887 S.W.2d 831 (Tex. 1994) (orig. proceeding) (screening effective to screen newly-hired legal assistant under Texas Rules); Grant v. Thirteenth Court of Appeals, 888 S.W.2d 466 (Tex. 1994) (orig. proceeding) (screening ineffective in particular case to screen newly-hired legal secretary under Texas Rules).

The Texas Supreme Court essentially held that a firm can avoid disqualification that would otherwise arise by the hiring of a nonlawyer if it took reasonable steps to ensure that the nonlawer did not disclose information he knew to the firm, or be put in position to misuse it. That appears to be the approach most courts are taking to this issue. However, as this issue was going to "press," a Florida district court went the other way, disqualifying a firm even though it had set up ethical screens around a transferring secretary.

III. Conclusion.

Because of the lack of certainty in the law, every new hire by a law firm creates the possibility for disqualification or the expense of having to defend a motion to disqualify. There are certain steps that law firms might consider implementing in their hiring processes.

First, the potential hire should be asked to name every client that he personally represented at a prior employer. Those names can then be evaluated for conflicts.

Second, and especially if the person is departing a firm which is currently representing a party adverse to a client of the hiring firm, the potential hire should be asked whether, even if he was not involved in such matters, he nonetheless has knowledge of information relating to those matters. (Care should be taken not to learn the content of such information, but rather merely the fact that it did or did not occur.) For example, it may be that the person did not work on the matter, but attended weekly staff meetings at a small firm where all matters were regularly discussed.

Third, and even if the office in which the person will work does not recognize "screening" as a means to avoid imputed knowledge, the firm should establish a screen such as, for example, following the procedures discussed by the Texas Supreme Court in the cases discussed above.

Fourth, to the extent feasible, the hiring firm should consider obtaining consent from the former firm. For example, if the hiree is coming from a firm that is representing a client currently adverse to a client of the hiring firm, but the transferring person has no knowledge of that case, the hiring firm should consider disclosing the fact that it is creating a screen; obtaining acknowledgement from the departing firm that the transferring person has no knowledge of the adverse matter; and obtaining their consent (on behalf of their client) to permit the transfer to occur with the screen in place.

Fifth, in some instances it may be impossible for the transferring lawyer to adequately disclose information to the firm. For example, suppose the lawyer knows that a client that the firm he is departing is about to file suit against a client of his new firm. He knows nothing but that fact; yet, he cannot disclose that fact to his new firm since it might allow that firm's client to file a preemptive suit. In these and in sensitive matters, consultation with outside counsel may be in order.

Finally, because the law is uncertain and developing, independent research into the standards that might likely apply should be conducted. This short summary cannot take the place of careful legal research and careful application of law to the facts.

Because the law is undeveloped, and because a dispute may arise in a jurisdiction which recognizes screening, these steps may help law firms and corporations to avoid conflicts of interest arising from transferring lawyers. Policies and procedures can be put in place to help reduce controversy, expense, and embarrassment.

E-Ethics is a free monthly e-mail based newsletter concerning ethical issues in the practice of law, ranging from conflicts of interest, to in-house counsel licensing requirements, to the ethics issues created by the use of high-technology. Links to numerous sites relating to those topics, as well as other discussions, can be found on Hricik.com. Obviously, as is the case with any legal question, the matters discussed in E-Ethics are time-sensitive and subject to change. No one should rely on E-Ethics in place of actual legal advice addressed to a specific set of known facts.

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