Conflict-of-Interest Rules to Be Reconsidered

Although a bid to relax attorney ethics rules imputing conflicts of interest to lawyers in private firms was tabled during an ABA House of Delegates vote this past summer, at least two new proposals are expected to be considered at this winter’s meeting that could affect attorneys making lateral moves.

The current version of Model Rules of Professional Conduct 1.10 provides that a lawyer’s conflicts of interest, which have arisen from involvement in a matter handled at one firm, follow that attorney to a new firm and are imputed to the lawyers in the new firm.

The ABA Standing Committee on Ethics and Professionalism submitted a proposed amendment to the rule that would have enabled a law firm to “screen” the incoming attorney from representation adverse to the former client to allow the firm to continue representing its client without the consent of the incoming attorney’s former client.

The proposed amendment was postponed indefinitely by a vote of 192–191 by the House of Delegates at its August 2008 meeting after a Section of Litigation delegate asserted a last-minute amendment to the proposal required further analysis. Since that time, both the Standing Committee and the Section of Litigation have drafted revisions for further consideration by the House of Delegates.

The Standing Committee’s revisions include requiring that the screened lawyer’s former client be informed of the screening procedure, that there be certifications by the screened lawyer and the new firm demonstrating compliance with the screening procedures, and that the screened lawyer and the new firm respond timely to any concerns raised by the former client. The Standing Committee's proposal eliminates the need for client consent.

“The committee’s revisions focus on the screening process because [the committee] believes that effective screening of the transferring lawyer will protect the essential interests of the clients the lawyer served prior to leaving the firm for new employment,” explains Robert H. Mundheim, New York, chair of the Standing Committee.

However, the Section of Litigation opposes the Standing Committee’s proposed amendment. Lawrence J. Fox, Philadelphia, ABA Delegate, believes that the Standing Committee’s proposal “substitutes attorney conveyance over client loyalty to an extraordinary degree.”

In response to the Standing Committee’s proposal, the Section of Litigation has drafted its own proposal to submit to the House of Delegates. “There has been some sentiment that when the side-switching lawyer played no substantial role and knows no material confidential information that it would be inappropriate to impute a conflict,” says Fox.

In the report to accompany the Section’s recommendation to the House of Delegates, Robert L. Rothman, Section of Litigation chair, states that “the fiduciary duties of loyalty and confidentiality are not mere artifacts of history, but rather define as enduring values the very heart of the lawyer-client relationship.”

The Section’s proposal would permit certain lawyers who had limited participation and involvement in the case and did not learn material, confidential information to go to work for an adverse law firm without client consent as long as the transferring lawyer is screened and provides appropriate certification of compliance of proper screening.

Rothman believes that the Section’s proposed amendment “will preserve the client’s autonomy in those situations in which the client might experience high anxiety as a result of the client’s former lawyer going to work for the firm on the other side. The client will have to be consulted, the client will have to be informed, and the client will be asked, at the client’s discretion, to provide or withhold the client’s informed consent. Client peace of mind will still trump lawyer mobility.”

“In this way, the proposed rule strikes the proper balance between client loyalty and lawyer mobility in the one area where the profession can honestly say that the respective interests do fairly compete,” says Rothman.

The ABA House of Delegates will consider the two proposed amendments at its February meeting.

Keywords: Model Rules of Professional Conduct, Model Rule 1.10, conflict of interest, switching firms, lawyer-client relationships

• February 4, 2008 – Here are my thoughts on why Recommendation 110 will “advance the ball” on easing the transition for laterals while not unnecessarily endangering clients’ interests: http://schlissellaw.wordpress.com/2009/02/03/conflict-of-interest-rules-will-be-getting-more-lenient/
• November 17, 2008 – I fear that the public’s perception of the legal profession will be further eroded, particularly if there is pending or anticipated litigation between the client of the firm from which the lawyer plans to transfer and the client of the law firm to whom the lawyer is transferring. It would be wiser to wait until the litigation is concluded before the transfer is made. The Chinese Wall may work for paralegals, but lawyers, like Caesar’s wife should remain above suspicion. A retreat from the existing rule invites only criticism of the profession, if not mischief.
• November 14, 2008 – I hope that the Litigation Section supports the revised proposal to amend MRPC 1.10 to permit screening of laterals. In Illinois, a less restrictive rule has been in place for many years and has been highly successful.
• November 14, 2008 – Notification, or lack of it is a problem. If the lateral hire's firm's client is not notified and later finds out that one of the attorneys in the firm that represented it has joined the firm of attorneys who represent its adversary the absence of notification is likely to create problems for everyone. The client will be upset if his attorneys do not tell him about their former partner or associate joining the firm representing the adversary, and the client may insist on seeking to disqualify the adversary's attorneys notwithstanding their claim that they have walled off the lateral hire. How can anyone know that the walling off is effective given email and file shareing capabilities. I remember the days when 20 partner law firms were considered large and it it was very rare that a partner would leave and join another firm. Today it is commonplace for partners to jump ship and the old rules are interfering with the flexibility deemed necessary in order for the modern firm to function and be profitablet. The proposed change in the rules is more evidence that professionalism is taking a back seat to profit.

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