Opinions

Ethics Opinion 212

Representation by Law Firm Adverse to Former Client in a Substantially Related Matter After Lawyers Who Represented Former Client Have Left the Law Firm

A law firm may undertake representation adverse to a former client in a matter substantially related to the matter for the former client, provided that (i) all firm lawyers who represented the former client in the first matter have left the firm, and (ii) no lawyer remaining in the firm has, or has access to, confidences or secrets of the former client that are material to the related matter for the second client. New District of Columbia Rule 1.10(c) would compel a contrary result on and after its effective date of January 1, 1991. However, on the facts presented, and assuming the representation would otherwise continue after January 1, 1991, new Rule 1.10(c) should not be applied in this case to require the law firm to resign as counsel for the second client; the representation approved herein may continue after January 1, 1991.

Applicable Code

  • DR 4-101 (Preservation of Confidences and Secrets of a Client)
  • DR 5-105 (Refusing to Accept or Continue Employment if the Interests of Another Client May Impair the Independent Professional Judgment of the Lawyer)

Applicable Rule1

  • Rule 1.10(c) (Imputed Disqualification)

Inquiry
The inquirer is a law firm (“the Law Firm”). Beginning in late 1983 and continuing through November 1987 the Law Firm represented a client (“First Client”) in connection with First Client’s negotiation of a billion dollar construction contract with the United States Government for a large military facility in a foreign country.

First Client as the overall construction manager-engineer is in substance the general contractor for the project. The project is ongoing and is not expected to be completed until sometime in the mid-1990s.

In March 1987, one of the two partners of the Law Firm who had been principally involved in the representation of First Client resigned from the Law Firm and joined another law firm (“Second Law Firm”). The other partner remaining in the Law Firm who had been involved in the representation of First Client continued to handle all matters for First Client, with the occasional help of other partners and associates. The Law Firm’s representation of First Client included several matters in addition to and unrelated to the military construction project.

In October 1987, as the Law Firm was nearing the end of the lengthy contract negotiation process and related matters on behalf of First Client with the U.S. Government, a long-time client of the Law Firm (“Second Client”) became a major subcontractor on the project, and asked the Law Firm to represent it vis-à-vis the project generally. At that time there were no disputes or anticipated disputes between First Client (the general contractor) and Second Client (the subcontractor).

In October 1987 the Law Firm obtained written consent of First Client to its representation of a Second Client, the consent containing this condition:

However, in the event of a dispute or conflict of any interest between [Second Client] and [First Client] . . . we would expect [the Law Firm] to remove itself from any contact or distribution of any information to any of the parties.

The Law Firm then undertook the representation of Second Client in connection with the project. The representation of Second Client was undertaken by lawyers in the Law Firm other than the lawyers who had been involved in the representation of First Client. A month later (in November 1987), apparently by coincidence, the other partner of the Law Firm who had been in charge of all matters for First Client resigned from the Law Firm and joined the same Second Law Firm that the first departing partner had joined eight months earlier. That second departing partner took all files of First Client with him to Second Law Firm.

Thus, in early November 1987, the Law Firm completely ceased to represent First Client, which thereupon and thereafter was represented by Second Law Firm on all continuing aspects of the construction project, including recurring disputes between First Client and the U.S. Government, and recurring disputes between First Client and various subcontractors.

In late 1988 disputes began to occur between First Client represented by Second Law Firm, and Second Client relating to the construction project. The Law Firm represented Second Client in connection with those disputes.

As the disputes between First Client and Second Client became more numerous and more serious, First Client in late 1989 asserted that the Law Firm must withdraw as counsel for Second Client on all disputes between First Client and Second client.

The Law Firm in its inquiry represents that, when the partner who was in charge of First Client’s matters left the Law Firm in November 1987 and took all of First Client’s files with him, as of that time and at all relevant times thereafter,

   (a) nobody remaining at the Law Firm had any “confidences” or “secrets” of First Client within the meaning of DR 4-104(A),
   (b) nobody remaining at the Law Firm had any “information [pertaining to First Client] protected by Rule 1.6” within the meaning of Rule 1.10(c), and
   (c) there were no files or other records of First Client remaining within the premises of the Law Firm containing any information described in the preceding clauses (a) and (b), material to the Law Firm’s ongoing representation of Client’s contractual disputes with First Client.

Discussion
It is clear that the lawyer-client relationship between the Law Firm and Second Client that is being challenged by First Client will continue well beyond January 1, 1991 in the ordinary course of events. Therefore, among other things, this inquiry presents a novel issue as to the applicability of Rule 1.10(c) to this case when that Rule becomes effective in the District of Columbia on January 1, 1991.

In responding to this inquiry we turn first to the “current” law; we then analyze the “new” law, namely, rule 1.10(c). Before considering “the law,” it is necessary to announced a caveat, and to discuss the issue presented by First Client’s conditional consent (referred to above) to the Law Firm’s representation of Second Client.

First, the caveat: the Law Firm’s representation that it has no relevant confidences or secrets of First Client appears to be consistent with the facts available to the Committee. We therefore assume the accuracy of that representation, and it is a fundamental premise in responding to this inquiry. It is not the function of this Committee to make its own determination on such fact-intensive issues.2

Second, it is the Committee’s view that as a matter of legal ethics the conditions imposed on the Law Firm by First Client in October 1987 when it consented to the Law Firm’s representation of Second Client are no longer binding on the Law Firm. The reason is that those conditions were based on the assumption by all concerned that somebody at the Law Firm would continue to be in possession of, or have access to, relevant confidences or secrets of First Client, and the Law Firm’s acceptance of those conditions was based on that assumption. Because that assumption is no longer correct, in our opinion those conditions no longer raise ethical concerns. Therefore, and from the viewpoint strictly of legal ethics, this inquiry is analyzed without further reference to First Client’s conditional consent to the Law Firm’s representation of Second Client.3 We now turn to the applicable law.

Current Law
The Committee concludes that the Law Firm’s representation of Second Client is materially adverse to First Client, and that the matter on which the Law Firm is representing Second Client is substantially related to the matter on which the Law Firm previously represented First Client. See, e.g., Comment [2] under new District of Columbia Rule 1.9, which makes it clear that the substantial relationship criterion is to be analyzed by reference to existing federal case law. An illustrative case is United States Football League v. National Football League, 605 F. Supp. 1448 (S.D.N.Y. 1985).

In this case, however, the combination of adverse representation and a substantial relationship is not the end of the analysis. There are no District of Columbia cases or opinions of this Committee precisely on point, but a consensus has emerged in the Code of Professional Responsibility states generally that, under DR 4-101 and DR 5-105, the Law Firm’s representation of Second Client in these circumstances is permissible, because nobody at the Law Firm has, or has access to, relevant confidences or secrets of First Client. Since 1983, that principle has been codified in what is now ABA Model Rule 1.10(b):

   (b) When a lawyer has terminated an association with a firm, the firm is not prohibited from thereafter representing a person with interests materially adverse to those of a client represented by the formerly associated lawyer and not currently represented by the firm, unless:

 (1) the matter is the same or substantially related to that in which the formerly associated lawyer represented the client; and

 (2) any lawyer remaining in the firm has information protected by Rules 1.6 and 1.9(c) that is material to the matter.4

Thus, “current” law, as evidenced by and codified in ABA Model Rule 1.10(b), predicates disqualification on (i) a substantial relationship and (ii) possession of relevant confidences or secrets of the former client. In this case, predicate (ii) is absent, so the Law Firm’s representation of Second Client is proper under current law.

New Law
District of Columbia Rule 1.10(c), the counterpart of ABA Model Rule 1.10(b), would disqualify the Law Firm (effective January 1, 1991) because the D.C. Rule is drafted in the disjunctive: it predicates disqualification on (i) a substantial relationship or (ii) possession of relevant confidences or secrets of the former client:

   (c) When a lawyer has terminated an association with a firm, the firm is not prohibited from thereafter representing a person with interests materially adverse to those of a client represented by the formerly associated lawyer during the association unless:

 (1) the matter is the same or substantially related to that in which the formerly associated lawyer represented the client during such former association; or

 (2) any lawyer remaining in the firm has information protected by Rule 1.6 that is material to the matter.

The District of Columbia deviation from ABA Model Rule 1.10(b), resulting in the more restrictive District of Columbia Rule 1.10(c) quoted above, is both explicit and deliberate. The original version of the District of Columbia rules was drafted by the District of Columbia Bar Model Rules of Professional Conduct Committee (commonly referred to as the “Jordan Committee” after the name of its Chair, Robert E. Jordan, III, Esquire). The Jordan Committee in its September 1985 Report to the District of Columbia Bar Board of Governors proposed the deviation from the ABA version. The Jordan Committee’s proposal was adopted by the Bar Board of Governors in its November 19, 1986 Petition to the District of Columbia Court of Appeals, and by the Court of Appeals in its September 1, 1988 Proposed Rules, and in its March 1, 1990 Order promulgating the new Rules.

The Jordan Committee, acknowledging that the question was a close one, explained its stricter version of Rule 1.10(c) as follows:

The ABA [Rule 1.10(b)] would disqualify the firm only if the matter were the same matter or substantially related to a matter in which the departing lawyer represented the client while with the firm and a lawyer still with the firm possessed client confidences or secrets material to the matter. [Emphasis in original.] The Committee thought it wrong that adverse representation should be allowed, in any kind of matter, where client confidences or secrets material to the matter remain in the firm. It therefore proposes changing the ABA’s ‘and’ to ‘or’ in paragraph (c). It is a closer question whether the possession by a remaining lawyer of confidences or secrets should not be the sole test for firm disqualification. The committee believed, however, that it is appropriate to provide for disqualification in the same or related matter to avoid the unseemly spectacle of all the lawyers responsible for a particular piece of litigation leaving a firm and the firm turning up the next day as counsel for the opposing party. Apart from the general unseemliness of such a situation, the firm might well have in its files, or in the knowledge paralegals or other nonlegal personnel, significant confidences or secrets of the former client. Rather than requiring an inquiry into the knowledge of confidences or secrets, paragraph (c) simply forbids representation by the former firm in such circumstances. [Bold type in original.]

Consistent with the foregoing, the official Comment under District of Columbia Rule 1.10 contains the following explanation of Rule 1.10(c):

[17] Conversely, when a lawyer terminates as association with a firm, paragraph (c) provides that the old firm may not thereafter represent clients whose interests are materially adverse to those of the formerly associated lawyer’s client in respect to a matter which is the same or substantially related to a matter with respect to which the formerly associated lawyer represented the client during the former association. For example, if a lawyer who represented a client in a litigation while with Firm A departs the firm, taking to the lawyer’s new firm the litigation, Firm A may not, despite the departure of the lawyer, who takes the matter and the client to the new firm, undertake a representation adverse to the former client in that same litigation.

The Jordan Committee, the Board of Governors, and the Court all were concerned about what the Jordan Committee described as the “unseemly spectacle” (not present in this case) of a law firm switching sides in a pending case immediately following the departure from the firm of all of the lawyers who had previously been involved on the other side of that case. In addition, the Jordan Committee expressed its concern about a key issue identified above: the difficulty of determining as a matter of fact exactly what information the lawyers remaining in a firm have in their heads or in their files following the departure of a lawyer or group of lawyers who had represented a former client.

The “effective date” or “retroactivity” issue presented by this inquiry appears to have been anticipated at least to some extent by the Court of Appeals in its March 1, 1990 Order, which contains the following paragraph:

FURTHER ORDERED, that with respect to conduct occurring before January 1, 1991, the provisions of the Code of Professional Responsibility in effect on the date of the conduct in question are the governing rules of decision for this court, the Board on Professional Responsibility, its hearing committees, and the Bar Counsel.

The foregoing effective date provision appears to us to encourage restraint in applying new Rule 1.10(c) in the circumstances presented by this inquiry. We therefore conclude that in this case the Law Firm’s representation of Second Client should be permitted to continue on and after January 1, 1991.

The issue presented by this inquiry may not be unique, and it is therefore appropriate to provide clarity and guidance for others similarly situated. We observe that our conclusion could have been, but is not, based on the fact that the representation at issue here commenced prior to March 1, 1990, the date of the Court of Appeals’ final Order promulgating the new Rules. It is self-evident that, because of the Court’s well-publicized January 1, 1991 effective date, many members of the Bar (including many of the most conscientious and best-informed members) will not read and analyze the new Rules until toward the end of the year. The Court in its Preface to the new Rules explicitly acknowledged that the new Rules are “complex and comprehensive,” and urged Bar members to attend “educational workshops” to be sponsored by the Bar “[o]ver the course of the next year.” Those workshops, which are now being planned, will not commence until October of this year and are not expected to be completed until mid-November at the earliest.

It is therefore unrealistic and unreasonable to assume that members of the Bar have actual knowledge or to charge them with constructive knowledge of the content of the new Rules as of March 1, 1990 or as of any other date prior to January 1, 1991. Accordingly, we hold that, if a lawyer-client relationship formed prior to January 1, 1991 was proper when commenced and continued to be proper under ethics principles applicable prior to January 1, 1991, the new Rules of Professional Conduct should not be applied on and after January 1, 1991 to require the abrupt termination of any such previously proper relationship.

 

May 1990


1. Rules of Professional Conduct and Related Comments (effective January 1, 1991), promulgated by Order of the District of Columbia Court of Appeals dated March 1, 1990.

2. It appears from the material submitted to the committee by the Law Firm and First Client that the only matter relating to this construction project that any current partner or employee of the Law Firm was involved in prior to the transfer by First Client of its business and its fields to Second Law Firm in November 1987 was this: in late 1985 and early 1986, an associate (who is now a partner) of the Law Firm logged eight hours of time researching the question of what remedies might be available to First Client if the U.S. Government purported to terminate the then-existing letter agreement with First Client. The Law Firm has advised the Committee that the person involved has no present recollection of that research (which he turned over to one of the partners who left the Law Firm in 1987), and that in any event he did not obtain in connection with that research any “confidences” or “secrets” of First Client material to the later contractual disputes between First Client and Second Client.

3. The Committee expresses no opinion on the question whether, as a matter of contract law, or on some other basis, First Client may enforce the October 1987 conditions against the Law Firm.

4. This ABA Model Rule was lettered 1.10(c) when it was originally promulgated in 1983; it was relettered 1.10(b) without substantive change as part of the ABA’s February 1989 revisions of the Model Rules.