July 2018 Ethically Speaking - How Will California’s New Rule Permitting Ethical Screening Impact Law Firm Disqualification?

by Suzanne Burke Spencer

On May 10, 2018, the California Supreme Court approved the new set of Rules of Professional Conduct proposed by the California State Bar over one year ago. The new rules will take effect on November 1, 2018. Among the approved new rules is a version of ABA Model Rule 1.10, which governs imputation of conflicts of interest. California’s Rule 1.10, as approved, expressly permits ethical screening, a practice used most commonly by larger law firms, to prevent imputation of conflicts of interest among attorneys at a firm. Until now, although common, the practice had not been expressly permitted under California’s ethical rules.


California’s version of Rule 1.10 is unique. It articulates a new standard for when ethical screens may be permitted that is not used by any of the other thirty-two jurisdictions that have adopted some version of Model Rule 1.10. It is unclear how that standard will be interpreted in California’s courts. Even more unclear is whether new Rule 1.10 will change how courts decide disqualification motions, which are based on a long line of case law that may or may not change based on the new ethics rules. Although courts often look to the Rules of Professional Conduct in disqualification cases to determine whether a conflict of interest prohibits a lawyer’s representation of a client, “[g]enerally speaking, the Rules of Professional Conduct govern attorney discipline; they do not create standards for disqualification in the courts.” Kirk v. First Am. Title Ins. Co., 183 Cal. App. 4th 776, 792 (2010). Ironically, while the new rule appears to permit screening in situations where California courts have consistently prohibited it for disqualification purposes, the rule may preclude screening where, for disqualification purposes, California courts previously may have allowed it. This tension between the new ethical rule and existing disqualification law is created, in part, by the difference in focus between the two.




Whether an Ethical Screen May Avoid Vicarious Disqualification Depends Primarily on the Relationship Between the Subjects of the Prior and Current Representations


Ethical screens are used to prevent imputation of one attorney’s conflict of interest to an entire firm by isolating the conflicted lawyer from every aspect of the firm’s representation. Employing an ethical screen may allow a law firm to rebut the presumption that confidential information actually or presumptively known to a conflicted lawyer is shared with the remaining lawyers at the firm. Screens have been permitted by California courts in certain contexts, such as when lawyers move between the public and private sectors, or where the screened person is a non-attorney or expert. However, for attorneys moving within the private sector, California courts have permitted ethical screening in only limited circumstances, and never in a case where an attorney actually involved in a client’s representation switches sides, joining the firm representing his former client’s adversary in the same case. See Henriksen v. Great Am. Sav. & Loan, 11 Cal. App. 4th 109, 115 (1992); Kirk, 183 Cal. App. 4th at 814 (“[W]hen 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, which may be rebutted by evidence of effective ethical screening. However, 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.”).



Earlier this year, the California Court of Appeals underscored this long-established automatic rule in side-switching cases. See California Self-Insurers Sec. Fund v. Superior Court, 19 Cal. App. 5th 1065, 1072, 1078 (2018). At the same time, courts have acknowledged that a rule of automatic disqualification in all cases would be archaic in a modern world where lawyer mobility is more prevalent. Unless the side-switching attorney is still employed by the firm when disqualification is sought, disqualification should be determined on a case-by-case basis. Id.


In cases where a lawyer’s conflict arises from representation of a former client in a substantially related, but not the same, matter, receipt of relevant confidential information by the conflicted lawyer is presumed, but the weight of existing California disqualification law would likely allow the firm in this situation to rebut the presumption of vicarious disqualification by establishing a timely and adequate ethical screen. The initial inquiry in determining whether an ethical screen could be employed to rebut the presumption, however, is whether the matters are substantially related. Although there is some split of authority on the point, most recent cases suggest that the presumption could be rebutted with a timely and adequate screen. Compare, e.g., Kirk, 183 Cal. App. 4th at 791, 814 (“vicarious disqualification . . . may be rebutted by a proper ethical wall” unless conflicted attorney switched sides in the same case) with Meza v. H. Muehlstein & Co., Inc., 176 Cal. App. 4th 969, 979 (2009) (screening “will generally not preclude the disqualification of the firm”). Where the matters are the same, however (as opposed to merely being substantially related), under existing California law, ethical screening cannot rebut presumptive vicarious disqualification.


In contrast, under new Rule 1.10, it appears that ethical screening is permitted even if a side-switching attorney was personally involved in a client’s representation, as long as that involvement did not rise to the level of “substantial” participation.


With Respect to Screening, New Rule 1.10 Focuses Primarily on the Extent of the Attorney’s Participation in the Former Representation


Under new Rule 1.10, a conflict arising out of an attorney’s representation of a former client at a prior firm in the same or a substantially related matter will not prohibit the firm from representing an adverse client as long as: (1) the tainted lawyer did not “substantially participate” in the prior matter while at her old firm, (2) the tainted lawyer is timely screened from participating in the current matter, (3) the tainted lawyer receives no portion of the fee therefrom, and (4) written notice is provided to the former client. The consent of the former client is not required.


New Rule 1.0.1(k) defines “screened” as:


[T]he isolation of a lawyer from any participation in a matter, including the timely imposition of procedures within a law firm[] that are adequate under the circumstances (i) to protect information that the isolated lawyer is obligated to protect under these rules or other law; and (ii) to protect against other law firm[] lawyers and nonlawyer personnel communicating with the lawyer with respect to the matter.


Comments [5] and [6] to new Rule 1.0.1 discuss the definition of “screened” and some of the minimum requirements for meeting the definition.


Under the new rule, whether an attorney may ethically be screened to prevent imputation to the entire firm will depend on the extent of the attorney’s participation in the prior representation. Presumably, then, screening will no longer prevent imputation to the firm of an attorney’s conflict if the attorney participated “substantially” in the prior representation, regardless of whether it was in the same or a substantially related matter.


This is somewhat of a departure from California disqualification law, which may allow, on a case-by-case basis, ethical screening to rebut a presumption of vicarious disqualification when the tainted lawyer’s representation was in a substantially related, but not the same, matter, even if the tainted lawyer substantially participated in the former matter. On the other hand, the new rule would appear to allow ethical screening, at least for disciplinary purposes, to prevent imputation of a conflict even in a side-switching case, as long as the lawyer who was personally involved in the prior representation did not “substantially participate” in it. This is also a departure from well-established California disqualification law that applies an automatic disqualification rule in such side-switching cases.


Under existing California disqualification case law, in determining whether screening can rebut the presumption of an imputed conflict, the primary focus is on whether the lawyer was directly involved in the prior representation and whether the matters are the same or are substantially related. Under new Rule 1.10, whether screening may prevent imputation of a conflict depends on whether the lawyer participated “substantially” in the prior matter, regardless of whether it is the same or a substantially related one.


Because of these differences in focus, it is difficult to predict how new Rule 1.10 will impact, if at all, California’s disqualification law. This is particularly true in light of the general proposition that the Rules of Professional Conduct are rules of discipline and do not create the standards for disqualification in court. See Kirk, 183 Cal. App. 4th at 792. Thus, even if compliance with new Rule 1.10 may avoid attorney discipline, disqualification or even civil liability may not similarly be avoided unless existing case law, particularly the automatic imputation of conflicts in side-switching cases, changes.


While many cases since Kirk have acknowledged that ethical screening may be considered on a case-by-case basis to rebut the presumption of imputation outside of the side-switching context, there are no reported California state cases since Kirk that have actually found an ethical screen sufficient to rebut the presumption of imputed disqualification. Federal courts have found ethical screens adequate in some cases. In a recent case, the court found an ethical screen sufficient to defeat the presumption of imputation where a former client sought to disqualify an attorney who had represented the client previously in a substantially related matter. The lawyer in that case had billed a total of twenty-six hours to the representation in the substantially related matter, and his involvement included “‘assist[ing] with discovery, draft[ing] memoranda, perform[ing] case law research, and communicat[ing] by phone and email with [p]laintiff’s former president regarding case-related matters.” National Grange of Order of Patrons of Husbandry v. California Guild, No. 2:14-676 WBS DB, 2017 WL 2021731, at *3 (E.D. Cal. May 12, 2017) (quoting record). The court, applying California law, held that because it was not a side-switching case, the automatic rule of vicarious disqualification did not apply, the tainted lawyer had been adequately and timely screened, and the motion for disqualification was accordingly denied. Id. Whether the level of participation by the tainted attorney in National Grange would constitute “substantial” participation in that representation under new Rule 1.10 is an interesting question that remains unanswered. But if the level of that attorney’s participation could be considered substantial under the new rule, then imputation of the lawyer’s conflict could not have been avoided by an ethical screen, even though the court here found that it was for disqualification purposes.


The law is likely to remain unclear for quite some time, as the “substantially participate” standard articulated in new Rule 1.10 is developed by the courts in disqualification motions made after the rule goes into effect. In the meantime, however, law firms should be aware that while new Rule 1.10 seems to pave the way to avoid imputed conflicts through ethical screening under certain circumstances, the state of the law remains in flux, and compliance with the rule may or may not avoid disqualification down the road.


Suzanne Burke Spencer is the Managing Shareholder of Sall Spencer Callas & Krueger, in Laguna Beach, where she focuses her practice on business litigation, legal malpractice and professional ethics. She is also the current Advisor of the State Bar of California’s Standing Committee on Professional Responsibility and Conduct (COPRAC) and Co-Chair of OCBA’s Professionalism & Ethics Committee. The views expressed herein are her own. She can be reached at sburke@sallspencer.com.