Vicarious Disqualification of Private Law Offices
LACBA Update, September 2010
By Louisa Lau, member and former chair of LACBA’s Professional Responsibility & Ethics Committee. Lau is a supervising attorney with State Compensation Insurance Fund, and a former member of the California State Bar Committee on Professional Responsibility and Conduct. The opinions expressed are her own.
In February 2009, the ABA House of Delegates, adopted Report 109 from the Standing Committee on Ethics and Professional Responsibility that amended Model Rules of Professional Conduct 1.10 (Imputation of Conflicts of Interest: General Rule)1 and 1.0 (Terminology),2 which permits the screening of a lawyer who moves from one private law firm to another, so that conflict of interests created by the moving lawyer under Model Rule 1.9 (Duties to Former Clients) are not imputed to all the other lawyers in the new law firm. These amended Model Rules are currently effective.
With screening, one lawyer’s conflict of interests would not require the entire firm to be disqualified from a case if the disqualified lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom.
Further, in addition to screening, the current version of amended Rule 1.10 imposes notice, statement, and certification of compliance procedures. Amended Rule 1.10 requires:
• A prompt notice to the former client confirming that no material confidential information was shared with the new firm prior to implementation of the screen,
• A statement about review of the screening process being available, and
• Certification by both the lawyers and firm, upon request and at the end of the process, that the screening procedures were followed, that no material confidential information was shared with the new firm, and that the transferring lawyer had not participated in the same or substantially related matter against the former client.
Presently, 24 states have similar rules that permit some level of ethical screening in the nongovernmental attorney context.
In California, courts routinely permit ethical screening involving government attorneys,3 even in concurrent representations.4 However, in the case of private practitioners or law firms, the California Supreme Court maintains that the need to maintain client confidences requires disqualification of a firm when one of the attorneys in the firm has confidential information of the adverse party.5 The general rule is that when an attorney is disqualified from representation, the entire firm is vicariously disqualified as well. Accordingly, an ethical wall between the disqualified attorney and his or her firm will generally not preclude the disqualification of the firm. A California appellate court went further, concluding that the firm representing one party must be disqualified when it associates as counsel an attorney who previously obtained confidential information from the opposing party, even in the absence of any evidence that confidential information was shared between the firm and the associated counsel.6
In the context of private law firms, California precedent has not rushed to accept the concept of disqualifying the attorney but not the firm, nor has it enthusiastically embarked upon erecting screens.7 There has been no definitive California authority authorizing ethical walls.8 However, last April, the Second District Court of Appeal in Kirk v. First American Title Insurance Co.9 provided an opinion with comprehensive historical development of the law regarding vicarious disqualification and the discussion of whether ethical screening should be available to preclude vicarious disqualification involving private law firms and not limited to situations involving government attorneys, former government employees, nonattorney employees, experts, and expert firms.
Concluding that when a tainted attorney moves from one private law firm to another, the law gives rise to a rebuttable presumption of imputed knowledge to the law firm, the Kirk Court states that the presumption may be rebutted by evidence of effective ethical screening. The court cautions that if the tainted attorney was actually involved in the representation of the first client and switches sides in the same case, no amount of screening will be sufficient, and the presumption of imputed knowledge is conclusive.10
There the trial court concluded that automatic vicarious disqualification was required. The appellate court reversed the order granting disqualification of the firm and remanded the matter to the trial court for further proceedings. The Kirk Court stressed that the inquiry before a trial court considering the efficacy of any particular ethical wall is not to determine whether all elements of a prescribed list (beyond timeliness and the imposition of prophylactic measures) have been established. It is, instead, a case-by-case inquiry focusing on whether the court is satisfied that the tainted attorney has not had and will not have any improper communication with others at the firm concerning the litigation.11
Relying on prior judicially developed elements for an effective ethical screening, the Kirk Court reiterates the following factors/elements by which a proper ethical wall is to be judged by the trial court:
• Physical, geographic, and departmental separation of attorneys.
• Prohibition against the discussion of confidential information.
• Established rules and procedures preventing access to confidential information and files.
• Establishment of procedures preventing a disqualified attorney from sharing in the profits from the representation.
• No supervisory powers of the disqualified attorney over the attorneys involved in the litigation and vice versa.
And finally, an additional factor derives from ABA Model Rule 1.10:
• Written notice to former client, the interested party’s consent is not required.
The Kirk Court noted that the California State Bar Rules Revision Commission proposed Rule 1.18, similar to the ABA Model Rules that permit the screening of a lawyer who moves from one private law firm to another to avoid vicarious disqualification of the lawyer’s firm.12
Note, however, that the California Rules Revision Commission recommends that Rule 1.18 be adopted without the provisions in Model Rule 1.18(d)(2) permitting a law firm that has received a prospective client’s confidential information to implement an ethical screen unilaterally and without the prospective client’s consent.13
In July 2010, the Board of Governors of the State Bar of California adopted Rule 1.18, which will be submitted to the California Supreme Court for approval. Of course, the law governing disqualification motions has different standards in comparison to ethical rules for purposes of attorney discipline. It is the attorney’s professional responsibility to ensure compliance of the California ethical rules and standards.
1 Model Rules of Professional Conduct, Client-Lawyer Relationship, Rule 1.10 Imputation of Conflicts of Interest: General Rule
(a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7 or 1.9, unless
(1) the prohibition is based upon a personal interest of the prohibited lawyer and does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm; or
(2) the prohibition is based upon Rule 1.9(a) or (b) and arises out of the disqualified lawyer’s association with a prior firm, and
(i) the disqualified lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom;
(ii) written notice is promptly given to any affected former client to enable the former client to ascertain compliance with the provisions of this Rule, which shall include a description of the screening procedures employed; a statement of the firm's and of the screened lawyer's compliance with these Rules; a statement that review may be available before a tribunal; and an agreement by the firm to respond promptly to any written inquiries or objections by the former client about the screening procedures; and
(iii) certifications of compliance with these Rules and with the screening procedures are provided to the former client by the screened lawyer and by a partner of the firm, at reasonable intervals upon the former client's written request and upon termination of the screening procedures.
(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.
(c) A disqualification prescribed by this rule may be waived by the affected client under the conditions stated in Rule 1.7.
(d) The disqualification of lawyers associated in a firm with former or current government lawyers is governed by Rule 1.11.
2 Model Rules of Professional Conduct, Client-Lawyer Relationship, Rule 1.0 Terminology...
(a) "Belief" or "believes" denotes that the person involved actually supposed the fact in question to be true. A person's belief may be inferred from circumstances.
(b) "Confirmed in writing," when used in reference to the informed consent of a person, denotes informed consent that is given in writing by the person or a writing that a lawyer promptly transmits to the person confirming an oral informed consent. See paragraph (e) for the definition of "informed consent." If it is not feasible to obtain or transmit the writing at the time the person gives informed consent, then the lawyer must obtain or transmit it within a reasonable time thereafter.
(c) "Firm" or "law firm" denotes a lawyer or lawyers in a law partnership, professional corporation, sole proprietorship, or other association authorized to practice law; or lawyers employed in a legal services organization or the legal department of a corporation or other organization.
(d) "Fraud" or "fraudulent" denotes conduct that is fraudulent under the substantive or procedural law of the applicable jurisdiction and has a purpose to deceive.
(e) "Informed consent" denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.
(f) "Knowingly," "known," or "knows" denotes actual knowledge of the fact in question. A person's knowledge may be inferred from circumstances.
(g) "Partner" denotes a member of a partnership, a shareholder in a law firm organized as a professional corporation, or a member of an association authorized to practice law.
(h) "Reasonable" or "reasonably" when used in relation to conduct by a lawyer denotes the conduct of a reasonably prudent and competent lawyer.
(i) "Reasonable belief" or "reasonably believes" when used in reference to a lawyer denotes that the lawyer believes the matter in question and that the circumstances are such that the belief is reasonable.
(j) "Reasonably should know" when used in reference to a lawyer denotes that a lawyer of reasonable prudence and competence would ascertain the matter in question.
(k) "Screened" denotes the isolation of a lawyer from any participation in a matter through the timely imposition of procedures within a firm that are reasonably adequate under the circumstances to protect information that the isolated lawyer is obligated to protect under these Rules or other law.
(l) "Substantial" when used in reference to degree or extent denotes a material matter of clear and weighty importance.
(m) "Tribunal" denotes a court, an arbitrator in a binding arbitration proceeding, or a legislative body, administrative agency, or other body acting in an adjudicative capacity. A legislative body, administrative agency, or other body acts in an adjudicative capacity when a neutral official, after the presentation of evidence or legal argument by a party or parties, will render a binding legal judgment directly affecting a party's interests in a particular matter.
(n) "Writing" or "written" denotes a tangible or electronic record of a communication or representation, including handwriting, typewriting, printing, photostating, photography, audio or videorecording and e-mail. A "signed" writing includes an electronic sound, symbol or process attached to or logically associated with a writing and executed or adopted by a person with the intent to sign the writing.
3 City of Santa Barbara v. Superior Court, 122 Cal. App. 4th 17 (2004); People v. Christian, 41 Cal. App. 4th 986 (1996); Castro v. Los Angeles County Bd. of Supervisors, 232 Cal. App. 3d 1432 (1991); Chadwick v. Superior Court, 106 Cal. App. 3d 108 (1980); Chambers v. Superior Court, 121 Cal. App. 3d 893 (1981); In re Lee G., 1 Cal. App. 4th 17 (1991); People v. Daniels, 52 Cal. 3d 815 (1991); In re Charlisse C., 45 Cal. 4th 145 (2008).
4 See, for example, Castro v. Los Angeles County Bd. of Supervisors, 232 Cal. App. 3d 1432 (1991).
5 People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc., 20 Cal. 4th 1135 (1999).
6 Pound v. DeMera DeMera Cameron, 135 Cal. App. 4th 70 (2005).
7 Higdon v. Superior Court, 227 Cal. App. 3d 1667, 1679 (1991); Klein v. Superior Court, 198 Cal. App. 3d 894, 912 (1988); Rosenfeld Construction Co. v. Superior Court, 235 Cal. App. 3d 566 (1991); Henriksen v. Great American Savings and Loan, 11 Cal. App. 4th 109 (1992).
8 Sharp v. Next Entertainment Inc., 163 Cal. App. 4th 410, 438, fn.11 (2008); 1 Vapnek et al., Cal. Practice Guide: Professional Responsibility, ¶ 4:204.4, p. 4-60.18.
9 Kirk v. First American Title Insurance Co., 183 Cal. App. 4th 776 (2010) rev. denied.
10 Id. at 814.
11 Id. at 811.
12 See http://ethics.calbar.ca.gov/LinkClick.aspx?fileticket=cxmQfkdJxzk%3d&tabid=853.
13 See California Commission for the Revision of the Rules of Professional Conduct, Proposed Rule 1.18, Duties to Prospective Client, May 2010, pp. 8-9.