Sunrise, Sunset...or Termination Letters: Avoiding Former Client Conflicts
LACBA Update, September 2002
By Diane L. Karpman, former chair, LACBA Professional Responsibility & Ethics Committee. Karpman of Karpman & Associates in Los Angeles represents attorneys in disciplinary matters and is an expert consultant and witness on legal ethics issues. The opinions expressed are her own.
Conflicts of interest with former clients plague the profession. If you are successful and have many clients, this becomes a liability since you will have more conflicts denying your ability to work down the road. The former client conflict rule restricts growth and income for lawyers, especially if the lawyer is a specialist.
If the former client conflict isn’t discovered in a timely manner, fees received for work performed may have to be refunded. However, the true harm is that former client conflicts seriously prevent clients from employing the lawyer of their choice.
Rule of Professional Conduct 3-310 (E) maintains that a member, absent informed written consent, shall not accept employment adverse to the former client if, by reason of the first representation, the lawyer acquired confidential information material to the second representation. When the issue involves former clients, the fiduciary duty at issue is that of confidentiality, although some vestiges of the duty of loyalty can remain.
Clients must be secure in their reasonable belief that whatever they disclose to their lawyers won’t come back to haunt or harm them in any way. This ability to freely and securely disclose secrets enhances the delivery of legal services. Lawyers cannot competently perform unless they know everything that could have an impact upon the case.
For Rule 3-310 (E) to apply, the subsequent employment of the lawyer must be adverse to the first client’s matter. What degree of adversity is required? Some courts maintain that it’s sufficient if the interests of the parties aren’t exactly “aligned”. Other courts maintain that minor differences are insufficient to raise a conflict.
Remember that a true attorney-client relationship isn’t a prerequisite to bring a motion to disqualify. What is critical is the receipt of confidential information. Confidential information may be received by a lawyer in non-representation capacities, such as serving on a board, acting as monitoring counsel, or serving as a designated expert witness. These different roles sometimes can justify future disqualification of counsel.
However, for disqualification to be justified, the work originally performed or the information obtained must be substantially related to the later employment. Therefore, if you handled real property leases for a fast-food corporation, that would have little if any relationship to subsequently being opposed to that fast-food corporation in an employment dispute involving discrimination. The confidences you may have received involving prime locations have little relationship to employment practices in management.
Former client conflicts are particularly difficult for former in-house counsel. Former in-house counsel may have learned the corporate “playbook”. They know how “the corporation” thinks, its litigation strategy, settlement buttons, and plays it will call to make a touchdown. Yes, it’s just like football. Therefore, when you leave the corporation and want to pursue a private practice, can you ever litigate against such a former client? After all, you, too, have a right to make a living. The issue is — How relevant or stale is the information you have learned? Has management changed, making your information flat, or is it still effervescent? In “playbook” cases, there are no magic numbers in the passage of time.
Another restriction for all lawyers (including former in-house counsel) involves the fact that lawyers cannot attack their own work. Therefore, you cannot create an estate plan, then represent the other side in destroying it. It’s unseemly. It creates tremendous mistrust in the minds of clients. They believe that we are smart enough to craft deals with flaws that we can take advantage of in future litigation against them. The issue of attacking one’s own work also involves the other fundamental fiduciary duty of loyalty.
One method of imposing some control on former client conflicts involves clear termination letters. Most lawyers are reluctant to send termination letters, which may end claims of continuing representational expectations, because the letters are contrary to notions of good marketing. The idea that our doors are always open with a welcome sign flashing is attractive. This is the reason we send newsletters, Christmas cards, and other memorabilia that clients may claim evidence our continuing duties of being there for them if they need us.
Sometimes an argument for termination can be asserted based on the natural conclusion of a particular piece of business. For example, you are retained to obtain a zoning variance. You succeed. Your performance obligations have terminated. Here, lawyers working in specialty fields are in a better position, since there’s usually a beginning and an end, as opposed to the “always open” philosophy of general practitioners who handle everything from soup to nuts.
If your practice area lacks a sunrise and a sunset, think about your ability to obtain future business by sending termination letters. They will allow you to take future business and continue to support your family in the life style to which they have become accustomed.