Dangerous Liaisons: Application of Conflicts Law to Attorneys Changing Firms
LACBA Update, November 1999
By Stanley E. Goldich, member and former chair of the Professional Responsibility and Ethics Committee. Goldich is a shareholder with Pachulski, Stang, Ziehl & Young P.C. The views expressed are his own.
Application of conflicts law to attorneys moving from one law firm to another is an unsettled and evolving area of law. A primary purpose of the conflict rules is to ensure that the attorney’s duties of loyalty and confidentiality are not violated.
While these duties are often overriding considerations in conflict situations, the law also recognizes the importance of a client’s choice of counsel.
An attorney changing firms is a situation where there is often a need to balance the duty of confidentiality with the general policy favoring freedom to counsel of choice. Potentially disqualifying conflicts may be created for the new firm arising from both open and concluded matters that the lateral hire worked on at the prior firm.
Identifying potential conflicts resulting from hiring an attorney from another firm requires an understanding of two conflicts standards: (1) the substantial relationship test, and (2) the imputed knowledge doctrine.
Substantial Relationship Test
Absent informed written consent, an attorney or law firm is generally prohibited from taking on a new representation if there is a risk that confidential information of a current or former client may be used or disclosed.
The substantial relationship test is used to determine whether an attorney or law firm has material confidential information. There is an irrebuttable presumption that an attorney has confidential information material to a new matter if material confidential information would normally have been imparted by virtue of the nature of a prior representation.
Determination of whether a substantial relationship exists involves a fact-intensive inquiry. Relevant factors include the similarities between the factual situations, the legal questions posed, the nature and the extent of the attorney’s involvement, the attorney’s possible exposure to formulation of policy or strategy, and the age of the representation and information obtained. The substantial relationship test does not require proof that an attorney or law firm actually has material confidential information.
Imputed Knowledge Doctrine
The imputed knowledge doctrine provides that knowledge by any member of a law firm regarding a matter handled by the firm is knowledge of all attorneys in the firm. Thus, even if an attorney has no involvement in a matter handled by their firm, the attorney is generally presumed to have been exposed to all information relating to the representation.
Conflict Scenarios and Unresolved Issues
The conflicts an attorney takes to a new firm are not fully resolved. Conflict scenarios that may arise as a result of the hiring of an attorney from another firm include the following:
A. The new attorney’s prior firm represents, or formerly represented, a party that the new firm is suing, but the new attorney did not work on the prior representation;
B. The attorney previously represented a party the new firm is suing or has been retained to sue.
Whether or how the substantial relationship test and the imputed knowledge doctrine are applied to these scenarios may determine whether a conflict exists. Most ethics experts agree that knowledge relating to a client of the prior firm in scenario A should not be imputed to the new firm unless the new attorney had actual knowledge.
The resolution of scenario B is less certain. The attorney may only have worked on a very limited aspect of the prior representation at the old firm. Should the substantial relationship test be applied only to that portion of the representation which the attorney was involved? Alternatively, should any conflict be based on the attorney’s actual knowledge?
While the answers to these questions are uncertain, lawyers and law firms should carefully evaluate their policies and procedures when hiring an attorney from another firm to avoid becoming embroiled in conflict of interest litigation.