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New Florida Ruling Raises Questions on Attorney Ethics

By Teresa Rider Bult, Litigation News Associate Editor – May 18, 2009

A pending federal court appeal [PDF] is expected to highlight what some consider a basic issue in attorney-client ethics. A recent ruling [PDF] that has allowed an attorney representing a corporation’s interests to switch sides and begin filing actions against his former corporate client, is now pending in appeal before the Eleventh Circuit. Morgan Stanley & Co. v. Solomon.


History of Morgan Stanley
Earlier this year, the U.S. District Court for the Southern District of Florida denied Morgan Stanley’s request for a preliminary injunction to disqualify a former associate of a law firm that had been its counsel from representing claimants in a securities arbitration against the company. Although the associate was bringing cases similar to those he had defended while working at the law firm, the court found these new claims were not “substantially related” to the claims he handled on behalf of Morgan Stanley six years prior.


The court reasoned that under Rule 4.1.9 of the Florida Rules of Professional Conduct (similar to Rule 1.9 of the ABA Model Rules), disqualification was inappropriate.


The court found that even though the associate had been privy to information about Morgan Stanley’s policies and procedures, arbitration panel, and strategy defense, and had obtained some limited confidential information, this was not enough to prevent him from representing the new claimants.


The court’s decision focused on the specific facts of the case rather than Morgan Stanley’s history, finding that because the current claims were brought by different individuals and involved different securities and brokers, the facts were “wholly distinct” from the ones presented when Solomon worked on behalf of the company.


It also found that any confidential information the associate possessed was related more to Morgan Stanley’s policies and procedures, which were “generally known,” rather than confidential information he could use against the company.


Morgan Stanley has filed an appeal of this decision to the Eleventh Circuit Court of Appeals.


Analysis
Some feel the decision is difficult to reconcile with a basic understanding of ethics rules and attorney-client privilege. “From a corporate perspective, it is troubling to think an attorney representing a company can be privy to a company’s strategy in defending certain claims, only to wait a few years to use that same knowledge to bring similar types of claims against the company on behalf of others,” says Rosemary C. Lumpkins, Redmond, WA, a Microsoft Corporation senior attorney and cochair of the Section of Litigation Corporate Counsel Committee’s Labor and Employment Subcommittee.


Those in support of the ruling do not view it that way. “I do not think this opinion will be as far-reaching as some would assert,” says Thomas G. Wilkinson Jr., Philadelphia, cochair of the Section’s Ethics and Professionalism Committee’s subcommittee on conflicts of interest.


“The court appeared to conduct an appropriate fact intensive analysis and determined this attorney had a narrow role in defending the corporation (as an associate, no less); had limited, outdated confidential information; and had not touched a file for the company for over four years. Thus, it was difficult for the former client to show it was entitled under those circumstances to enjoin him from bringing further similar claims,” Wilkinson explains.


Whether limited or not, Lumpkins believes that the ruling could ultimately create a chilling effect on corporate clients’ relationships with their attorneys.


“The fear is that corporations may be reluctant or less willing to share all of their information and strategy with their attorneys because they no longer feel the attorney-client privilege is sacred,” Lumpkins says.


“Decisions that take a narrow view of the obligation to avoid misuse of a former client’s confidences will not inspire confidence among corporate clients that their ‘play book’ will not later be used against them in litigation,” Wilkinson agrees.


In this economy, the ruling may take on even more meaning, as large-firm attorneys lose their jobs and seek to land on their feet by bringing suits in an area in which they were trained. The Eleventh Circuit appeal will be closely watched.


Keywords: Attorney-client privilege, ethics, labor and employment, Morgan Stanley & Co. v. Solomon


 
Related Resources
  • » In re Corn Derivatives Antitrust Litig., 748 F.2d 157 (3d Cir.1984) (granting motion re: Model Rule 1.9 to disqualify attorney who originally represented several class representatives, withdrew, and represented one objector on appeal; prejudice to former clients would be too great to justify continued representation).
  • » Havens v. State of Ind., 793 F.2d 143 (7th Cir. 1986) (noting it would have been prudent for prosecutor who had previously represented defendant on unrelated charges to withdraw under Model Rule 1.9, but finding it did not deny criminal defendant of due process).
  • » Health Care & Ret. Corp. of Am., Inc. v. Bradley, 961 So. 2d 1071 (Fla. Dist.Ct. App. 2007) (cited by Morgan Stanley) (denying motion to disqualify counsel despite the fact that lawyer had represented/ defended the corporate defendant in more than 60 similar negligent cases).

 

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