Lateral Transfers – Is VT’s Rule too Strict? Part 2.

Last week, I blogged  on lateral transfers, imputed conflicts, and ethical screens.

Consider this hypothetical:

  • Husband and Wife are divorcing
  • Old Firm represents Husband
  • New Firm represents Wife
  • Lawyer works at Old Firm.
  • Lawyer leaves for a job at New Firm

Upon Lawyer’s transfer, will New Firm be disqualified from representing Wife?

In Vermont, the answer is “it depends.”

The applicable rule is V.R.Pr.C. 1.10(a).  The critical question is whether Lawyer participated personally and substantially in Old Firm’s representation of Husband.

  • If the answer is “yes,” the rule imputes Lawyer’s conflict to New Firm and prohibits New Firm from curing the conflict by screening Lawyer.
  • If the answer is “no,” New Firm is not disqualified, even over Husband’s objection. as long as it screens Lawyer.

Last week, comparing the rule to the more lenient ABA Model Rule 1.10, I asked readers whether Vermont’s rule is too strict. I did not receive many responses.

Lateral Transfers: Three Different Approaches

I’ll use the original hypothetical throughout this post.

Jurisdictions are split on the issue.

One approach is to impute conflicts and prohibit screening.  Under this approach, absent Husband’s informed consent to waive the conflict, Lawyer’s conflict is imputed to all attorneys in New Firm and the firm is disqualified.

Other states, allow screening, even without the former client’s consent, but with exceptions.  This is Vermont’s approach.  Lawyer can be screened, but only if Lawyer did not participate personally & substantially in Old Firm’s representation of Husband.   Similarly, New Hampshire, New Firm could screen Lawyer, unless Lawyer “had substantial involvement in, or received substantial material information about, a matter that is ongoing at the time of the firm transfer and that would be the focus of the screening procedures.”  N.H. Rule 1.10(c).  

Finally, still other states allow New Firm to screen Lawyer, even over Husband’s objection, no matter how involved Lawyer was in Old Firm’s representation of Husband.  This is the  ABA approach, as reflected in ABA Model Rule 1.10, and is often referred to as “nonconsenual screening.”

The 2009 Amendment to the ABA Model Rules

Prior to 2009, the ABA Model Rules did not allow firms to screen lateral transfers.  In our hypo, absent Husband’s informed consent to waive a conflict, Lawyer’s conflict was imputed to New Firm and New Firm could no longer represent Wife.

However, upon the recommendation of the Standing Committee on Professionalism Ethics, the House of Delegates amended the rule to allow firms to screen lateral transfers, even over the objection of the affected former client.  The Committee’s Report & recommendation includes a majority view and a dissenting minority opinion.

By way of summary, the majority’s points:

  • Nonconsensual screening allows lawyers to switch jobs/enjoy professional mobility.
  • Screening strikes an appropriate balance between protecting the former client’s confidences & allowing lawyers to take jobs of their choosing
  • The rules already allow screening when lawyers move to & from government employment.
  • Several states already allow screening when private lawyers switch firms.
  • Screening works, as evidenced by the lack of disciplinary complaints & prosecutions in the states that allow it.

The dissent argued against nonconsensual screening, concluding:

  • “Current rule 1.10 protects former clients against the risk of adverse use or disclosure of confidential information. The proposed amendment substitutes the law firm’s resolution of this risk for the client’s. It catapults the lawyer’s interests over the former client’s determination at precisely the time the lateral lawyer and the new firm have their own and their client’s interests understandably in mind. Lawyers should consult with former clients about these matters and be bound by the client’s determination, which is precisely what current Model Rule 1.10 requires.”  Report & Recommendation, p. 17.

Screening Procedures

Jurisdictions that allow nonconsensual screening generally require the same types of screening procedures.

in Vermont, if Lawyer did not participate personally and substantially in Old Firm’s representation of Husband, New Firm must comply with the three subsections of Rule 1.10(a)(2).  Generally, New Firm must:

  1. Screen Lawyer from any participation in the matter and not letter Lawyer share in any fee generated by the matter; and,
  2. Provide Old Firm with written notice & description of the screening procedures that New Firm will use; and,
  3. Certify compliance with the screening procedures  periodically throughout the life of the case.

The ABA/BNA Lawyers Manual on Professional Conduct has written on The Elements of an Effective Ethics Screen.

Is Screening Enough?

Nonconsensual screening raises concerns regarding loyalty and confidentiality.  In our hypo, Lawyer will have “switched sides” in the Husband v. Wife dispute, and might share information about Husband with New Firm.

It would be a violation of the rules for New Lawyer to share the information.  For example, Rule 1.9(c)(1) prohibits Lawyer from using any information to Husband’s disadvantage.  Rule 1.9(c)(2) prohibits Lawyer from revealing any information about the representation.

To some, that’s not enough.

For example, the ABA Section on Litigation published this post shortly after the ABA House of Delegates adopted Model Rule 1.10.  The post quotes a delegate who opposed nonconsensual screening as saying:

  • “Today the ABA abandoned its commitment to client loyalty and confidentiality for nothing more than an undemonstrated need for lawyer convenience . . . Today, we compromised our birth right.”

The post goes on to quote Robert L. Rothman. At the time, Rothman was the Chair of the ABA Section of Litigation.

  • “Unfortunately, under new Model Rule 1.10, clients who believe their interests are placed at risk when their former lawyer moves to an adverse law firm no longer can merely refuse to waive the conflict created by the lateral move, they must bear the burden of going to court if they wish to disqualify the former lawyer and his or her new firm,” says Rothman. “We believe the new rule undermines client loyalty and sends the wrong message to clients, who will see this as the profession placing its own economic interests ahead of the best interests of our clients.”

To others, screening is the answer, no matter Lawyer’s level of involvement with Husband’s matter at Old Firm.  In the Report and Recommendation from the ABA Standing Committee on Professionalism and Ethics,  the majority noted:

  • “Screening is not designed to impair the interests of clients, but to protect them. Screening provisions permitting private lateral screening have been adopted in nearly half the states, where hundreds of law firms and thousands of lawyers practice in cities like Baltimore, Charlotte, Chicago, Detroit, Louisville, Philadelphia, Pittsburgh, Portland, Seattle, and Wilmington, and in the various smaller communities in those states. No reported disciplinary cases or lawsuits have demonstrated any significant problem with the efficacy of screens. There is no record that screening in those states has been unable to protect confidentiality or to prevent the transferring lawyer from participating against the former client. Nor is there any record demonstrating that screens have been ineffective in the context of lawyers moving from government service to private practice. We are firmly convinced that screening can protect essential client interests in the context of private lawyers changing firms. The Ethics 2000 Commission came to the same conclusion.”

Is Vermont’s Rule Just Right or Too Strict?

Again, Vermont’s rule is more strict than the ABA’s.  We allow New Firm’s nonconsensual screening of Lawyer, unless Lawyer participated personally and substantially in  Old Firm’s representation of Husband.

In two posts last week, I asked whether our rule is too strict.  I did not receive many replies.

Two readers replied that Vermont’s rule is not too strict.  One wrote:

  • “The rule is not too strict.  We’ve got to stop making it easier for some lawyers to do things that make all of us look like scoundrels.”

My guess is that this lawyer’s comment  jibes with how  my non-lawyer friends and family members would react if they found themselves in Husband’s shoes upon Lawyer’s transfer to New Firm

An aspiring Vermont lawyer argued the opposite.  The aspiring lawyer wrote:

  • “my comment as to whether or not to adjust Rule 1.10(a)(2) would be to change it to match the ABA Model Rules.  It gives clients more freedom in choosing representation, it allows attorneys more employment opportunities and flexibility, and it allows firms to hire more seasoned attorneys without worrying about an attorney’s “personal or substantial” participation in former matters.”

Similarly, several months ago I heard from a Vermont attorney who was frustrated that our rule prevented a job change.  The attorney wrote:

  • “I understand the necessity to have such a rule, but the current iteration of the rule unfairly limits the movement of attorneys in Vermont. See generally Reporter’s Notes–2012 Amendment, V.R.Proc.C. 1.10 (Without such a procedure, a lawyer wishing to move from one Vermont firm to another may be denied his or her choice simply because of the unamended Rule 1.10)”

The attorney added that a potential new employer was “certainly large enough to put up a ‘wall’ until [the] litigation resolves itself.”

Connecticut does not allow screening.  A few years ago, the Connecticut Bar Association’s Committee on Professional Ethics recommended that the CBA amend its rules and adopt the ABA’s version of the rule.  The recommendation, which appeared in the Stoval Memo, is an excellent primer on the topic.  On page 8, it includes an argument that echoes the sentiment expressed by the frustrated lawyer who contacted me a few months ago:

  • “The Committee notes that amended Rule 1.10 does not permit ‘side-switching’ by an otherwise disqualified attorney. It simply permits other attorneys at his or her new  firm to continue to represent a party adverse to the moving lawyer’s former client.  1.9 would continue to prohibit such a lawyer from participating in a matter adversely to his or her former client, and would still dictate that the moving lawyer preserve former clients’ confidences and information, while still providing a lawyer the freedom to move  from one firm to another without encumbering his or her new firm with imputed conflicts of interest.”

Conclusion

I’m not ready to reach one.  I want to keep this debate going beyond me and 4 others.  What say ye?

  • A.  Leave V.R.Pr.C. 1.10 as is. If Lawyer participated personally & substantially in Old Firm’s representation of Husband, then New Firm can no longer represent Wife.  That’s the price of hiring Lawyer.

 

  • B.  Amend the rule. Trust New Firm to employ an effective screen and trust Lawyer to maintain Husband’s confidences. Prosecute Firm and Lawyer if they do not. Despite Lawyer’s  personal & substantial involvement at Old Firm, an effective screening rule strikes an appropriate balance between protecting Husband and allowing Lawyer the freedom to take another (perhaps, better) job.

Nonlawyers who are reading this, don’t hesitate to weigh in.  How would you feel if your lawyer started working at the firm that represents your adversary?

Irrelevant Post-Script

 

For you hockey fans, my head spun for weeks as I tried to figure out how to apply Rule 1.10 to Montreal’s hiring of Claude Julien within days of Boston’s decision to fire him .  Talk about switching sides. But then I learned that the B’s gave the Habs permission to negotiate with Julien.  Conflict waived.

Bruins

 

 

 

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Changing Firms: Is our rule too strict?

Lawyers often change jobs, moving from one firm to another.  These so-called “lateral transfers” can raise concerns about conflicts-of-interest, particularly when the new firm represents a client with interests adverse to a client represented by the former firm.  Many lawyers assume that the new firm can simply “wall off”, or screen, the new lawyer.  Under our current rules, that is not an accurate assumption.

Caveat: this column applies only to transfers from private firm to private firm.  Transfers to an from government work, including agency to agency, are governed by Rule 1.11(d) and are a topic for another day.

Here in 2017 I present the scenario:

  • Attorney works for New Firm
  • Attorney used to work for Old Firm
  • In the matter of Michael v. Corporate, Old Firm represents Michael and New Firm represents Corporate
  • Does Attorney’s lateral transfer disqualify New Firm?

In my view, the answer is “it depends.”  I’ll go through 2 possibilities.

Possibility 1:  Attorney Participated Personally & Substantially in the Representation of Michael while working at Old Firm.

As I interpret the rules, if Attorney participated personally & substantially in the representation of Michael while at Old Firm, Attorney has a conflict that is imputed to New Firm, and that cannot be cured by screening Attorney.

Start with Rule 1.9.  Section(b) indicates that Attorney has a conflict. I don’t think there’s any doubt that Attorney is prohibited from switching sides and representing Corporate in the same matter in which Attorney used to represent Michael.

Now, go to Rule 1.10. It’s the rule on the imputation of conflicts. Rule 1.10 was amended in 2012.  Depending on which copy of the green book you have, the current rule might be in the pocket part. Or, the rule is HERE.

Attorney’s conflict is based on Rule 1.9(b).  Thus, Rule 1.10(a) imputes the conflict to New Firm, unless one of the exceptions applies.

The exception in Rule 1.10(a)(1) does not apply.  Attorney’s conflict is not personal. It is a former client conflict that arises under Rule 1.9.

The exception in Rule 1.10(a)(2) does not apply.  Rule 1.10(a)(2) allows New Firm to screen Attorney if:

    1. Attorney’s prohibition is based on Rule 1.9(a) or (b); and
    2. Arises out of Attorney’s association with a prior firm; and
    3. In a matter in which Attorney “did NOT participate personally or substantially.”

Comment 7 hammers home the point: with lateral transfers, new firms can screen transfers, but only if the new lawyer is “one who ‘did not participate personally and substantially’ in the matter giving rise to the conflict.” (emphasis added).

In this version of the hypothetical, Attorney’s prohibition is:

  • based on Rule 1.9(b); and
  • arises out of Attorney’s association with a prior firm; and
  • arises out of a matter in which Attorney participated personally & substantially

Thus, Rule 1.10(a) imputes Attorney’s conflict to New Firm and prohibits New Firm from screening Attorney.  Of course, New Firm would not be disqualified if Michael provided informed consent, confirmed in writing.  See, Rule 1.9(a).

Possibility 2:  Attorney did not Participate Personally & Substantially in the Representation of Michael while working at Old Firm.

If Attorney did not participate personally & substantially in the representation of Michael, then it appears permissible for New Firm to screen Attorney.

If Attorney did not participate in the representation of Michael, Attorney likely does not have a conflict under Rule 1.9(a).  Of course, it is possible that Attorney acquired information about Michael, even without participating in Michael’s representation. If so, Attorney is bound to protect the information, but Attorney has a conflict under Rule 1.9(b).

However, in this scenario, the third prong of Rule 1.10(a)(2) is not present.  Let’s look at each prong again:

  • Rule 1.9(b) prohibits Attorney from representing Corporate; and
  • the prohibition arises out Attorney’s association with a prior firm; BUT
  • Attorney did not participate personally & substantially in the representation of Michael.

Therefore, Rule 1.10(a)(2) permits New Firm to screen Michael.  Subsections i, ii, and iii set out the specific screening procedures with which New Firm must comply.

ABA Model Rule 1.10 is not as strict as Vermont’s Version of Rule 1.10

In 2009, the ABA amended Model Rule 1.10(a)(2).  As amended, the Model Rule does not include the phrase “in a matter in which the disqualified lawyer did not participate personally and substantially.”  In other words, under the Model Rule, a new firm is permitted to screen a lateral transfer even if the new lawyer participated personally and substantially in the matter while at the old firm.

Question for Vermont

Should we follow the ABA’s lead and drop the ” participated personally & substantially” language?  That is, should we permit firms to screen new lawyers — no matter how substantial the lawyer’s involvement with a matter at a previous firm?

An argument for “no”:  the new lawyer has so much information that it would be patently unfair to allow new firm to remain in the case even if new lawyer is screened from participation.”

An argument for “yes”: Vermont is a small state with many potential conflicts.  We should not have a rule that restricts lawyers from leaving for new opportunities.

Go Cats Go!

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