The legal profession ain’t what it used to be. Many recall it as a place where a newly minted lawyer stayed with the same law firm for decades, then retired.  Now, a young lawyer may start as an associate with one firm, move to another firm three years later, go in-house at a corporate law department for several years, leave to become a partner in yet another firm, and then hang out a shingle for a stint at solo practice.  Lawyers, like the rest of the workforce, are far more mobile than they used to be.

Law firms themselves are more fluid. A small firm might combine with another small firm to create a middle-sized firm that eventually merges into a big firm.  Meanwhile, along the way, partners or associates come and go.

MIGRATING LAWYERS

Opportunities for change might bring a sense of liberation, but they also come with complicated responsibilities attached. These responsibilities include steering clear of conflicts of interest as lawyers migrate around the legal community.

The Rules of Professional Conduct provide the primary framework for analyzing conflicts of interest when lawyers move from one practice setting to another. The rules are designed to serve two overriding principles: loyalty to clients, and the obligation to protect the confidences of current and former clients.

LEAVING CLIENTS BEHIND

When a lawyer changes law practice settings, it has implications not just for the migrating lawyer, but also for the firm the lawyer left behind and the firm the lawyer joined. The conflict of interest analysis shifts depending upon whether the migrating lawyer takes a client with her or leaves the client behind.  Generally, when a lawyer leaves both a firm and a client behind, the extent to which the migrating lawyer will continue to be encumbered by responsibilities to the now-former client will turn on the nature of the lawyer’s contact with the client’s matter at the old firm.  Rule of Professional Conduct 1.9(b) provides that if the migrating lawyer acquired no information about the client that would be protected by the duty of confidentiality, the lawyer is free to represent a new client in the new practice setting whose interests are materially adverse to the former client, even in the same or a substantially related matter.  Likewise, because the migrating lawyer is free of the taint of a conflict of interest, her new law firm is equally unencumbered by a conflict of interest.

However, if the migrating lawyer was exposed to confidential client information at the old law firm (let’s call her a “tainted lawyer”), that exposure encumbers the tainted lawyer with a conflict of interest such that she cannot represent another client whose interests are materially adverse to the former client’s interests in the same or a substantially related matter. Id. The tainted lawyer is free, though, to take on a new client adverse to the former client so long as it is not the same matter or substantially related to the matter she was involved with at the old firm.  This illustrates the point that once the lawyer leaves the old firm and the former client behind, the primary value the rules seek to protect is confidentiality more so than loyalty.

SCREENING

Absent consent to the conflict, the tainted lawyer is personally disqualified from handling a related matter adverse to the old client. But what are the implications for the new firm when the tainted lawyer arrives?  Previously, the Rules of Professional Conduct did not contemplate the possibility of screening off the incoming, tainted lawyer in order to free the new firm to take on substantially related matters adverse to the tainted lawyer’s former client.  As a result, the incoming lawyer’s prohibition was imputed to the entire new law firm.  Rule of Professional Conduct 1.10(b) (2004).  This point should not have been in doubt, but a fair amount of confusion ensued when the Court of Appeals, interpreting Rule of Professional Conduct 1.10(b) (2004), decided Gerald v. Turnock Plumbing, Heating and Cooling, LLC, 768 N.E.2d 498 (Ind. Ct. App. 2002).  In Gerald, the court, relying on federal case law from the Seventh Circuit, allowed for the possibility that a tainted, incoming lawyer could be screened in order to interrupt the imputation of that lawyer’s disqualification to the new firm.  Under the Gerald facts, the court found that the screen imposed by new law firm was too late to be effective.

The conflict set up between the language of Rule of Professional Conduct 1.10(b) (2004) and Gerald was resolved when the Indiana Supreme Court amended Rule 1.10, effective January 1, 2005, to allow for screening under certain rigorous conditions spelled out in the rule.  Rule of Professional Conduct 1.10(c) (2005).  First, if the migrating lawyer had “primary responsibility” for the potentially disqualifying matter at the old firm, a screen will not avoid imputation of the conflict.

Also, the tainted lawyer must be timely screened—meaning the screen must be imposed before there is any opportunity for confidences of the former client to be shared. If the conflicting representation already exists at the new firm, the incoming, tainted lawyer must be screened from the outset of that lawyer’s association with the new firm.  If the conflicting representation comes to the firm after the tainted lawyer arrives, the screen must be imposed immediately upon the potentially conflicting matter first presenting itself to the new firm.  But, if the tainted lawyer has already shared confidential information about the former representation with members of the new firm (in violation of Rule 1.9(c)(2), I should add), it will be too late to impose a screen.

For a screen to be effective, the tainted lawyer cannot be apportioned any fee from the screened matter. However, Comment [6] to Rule 1.10 blunts the impact of that rule by stating that this “does not prohibit the screened lawyer from receiving a salary or partnership share established by prior independent agreement, but that lawyer may not receive compensation directly related to the matter in which the lawyer is disqualified.”

Whenever a screen is implemented, the screening firm must give written notice to the former client. This is so the former client can monitor the situation for possible breaches of the screen.

Screening is further defined in Rule of Professional Conduct 1.0(k), and Comments [8] through [10] of that rule expand on what must be done to make a screen effective.

MIGRATING CLIENTS

The second migrating lawyer scenario I mentioned above is when the migrating lawyer takes the case with her to the new law practice setting. In this event, if there is no one left at the old law firm who was exposed to confidential client information concerning the matter in question, the old firm is not prohibited from taking on a matter that is materially adverse to the old client, even in the same or a substantially related matter.  In this circumstance the implications for the migrating lawyer’s new firm are profound.  The incoming lawyer’s representation will be imputed to the new firm, and the new firm will be prohibited from representing or continuing to represent any client whose interests are directly adverse or whose representation might be materially limited by responsibilities to the incoming lawyer’s client.  In other words, the incoming lawyer’s client becomes a full-fledged client of the new law firm, and Rule of Professional Conduct 1.7, pertaining to concurrent conflicts of interest, fully applies to potentially disqualify the new firm from current representations and limit the new cases the new firm can accept.  Screening is never an option to wall off the conflicts that come to a law firm via clients that accompany migrating lawyers to a new firm.

A recent application of this principle can be found in Reed v. Hoosier Health Systems, Inc., 825 N.E.2d 408 (Ind. Ct. App. 2005).  In that case lawyers newly associated with a law firm filed suit on behalf of a client, who came with the lawyers from their old firm, against another client of the law firm, albeit on a matter unrelated to the new firm’s representation of the existing client.  A motion to disqualify the law firm from handling the suit was granted and affirmed on appeal.  It did not matter that there was no relationship between the two matters.  Without client consent, a law firm cannot file suit on behalf of one client against another client of the firm even in a matter wholly unrelated to the firm’s work for the other client.  This is so because lawyers owe a duty of loyalty to current clients, not only a duty of confidentiality.

The firm in Reed tried to cure the conflict by withdrawing from the unrelated matters for the client who had been sued.  The court found that this was ineffective, stating, “It is . . . established law that an attorney cannot avoid disqualification . . . merely by ‘firing’ the disfavored client . . . and transforming a continuing relationship to a former relationship by way of client abandonment.” Id. at 412, quoting Universal City Studios, Inc. v. Reimerdes, 98 F. Supp.2d 449, 453 (S.D. N.Y. 2000).  This is sometimes known as the “hot potato” doctrine.

INFORMED CONSENT—MAYBE

Under many, but not all, of the circumstances described above, the informed consent of affected current or former clients may cure a conflict of interest. Since January 1, 2005, when consent to a conflict of interest is otherwise permissible, the consent must be in writing, either signed by the affected current or former client or confirmed in writing by the lawyer or firm that solicited the consent.

Special conflict of interest rules govern lawyers who migrate into or out of government employment, Rule of Professional Conduct 1.11, or who formerly acted as judicial officers or third-party neutrals. Rule of Professional Conduct 1.12.

Conflicts of interest are complex. When lawyer migration is added to the mix, they become even more complex.  Large law firms often have the benefit of in-house expertise to sort through such matters.  The solo practitioner or small firm should give serious consideration to seeking advice of outside counsel when faced with particularly complicated conflict of interest questions.