by Nicole Nuzzo
Most lawyers will move from one law firm to another throughout their career. The migration of a lawyer, whether associate or partner, results in an ethical minefield requiring careful navigation through each obstacle to ensure a law firm’s business is not hampered by the migration. When considering whether to make an offer to a lateral hire, law firms should not only consider the financial impact of the compensation package offered, but also the potential of the lateral to hinder current and future business because of conflicts of interest.
This article addresses ethical rules governing conflict checks during lateral hire migration. It also discusses practical issues for law firms engaging in lateral hiring. Potential disqualification in civil proceedings is not addressed in this article; though, this issue should also be analyzed during the lateral hire process.
Former Client Conflicts
California Rule of Professional Conduct 1.9(a) prohibits a lawyer who formerly represented a client in a matter from representing another client in the same or a substantially related matter in which the former and current client’s interests are materially adverse, unless the lawyer first obtains informed written consent from the former client. This rule recognizes that a lawyer who formerly represented a client in the same or a substantially related matter likely will have acquired confidential information from the former client that is material to the new matter.
The first inquiry in determining whether this rule is implicated revolves around whether the two matters are the same or substantially related. Two matters should be deemed substantially related if they involve a clear and weighty risk of a violation of one of the two duties owed to a former client, that is, to not do anything that will injuriously affect the former client in any matter in which the lawyer represented the former client, or at any time use against a former client knowledge or information acquired by virtue of the previous relationship. Cal. Rules Prof’l Conduct, 1.9, Cmt. ; see also Oasis West Realty, LLC v. Goldman, 51 Cal. 4th 811, 821-23 (2011); Wutchumna Water Co. v. Bailey, 216 Cal. 564, 573-74 (1932).
If a lateral hire previously represented a client at her old firm in a matter that is the same as or substantially related to a matter being handled by her new firm, and the former client’s interests are adverse to the new firm’s current client’s interests, the lateral hire will be presumed to have acquired confidential information from the former client that is material to the matter being handled by her new firm. Consequently, the lateral hire and her new firm will be prohibited from taking on or continuing the representation adverse to the former client unless the former client gives informed written consent.
Whereas Rule 1.9(a) applies to the individual lawyer’s former representation of a client in the same or substantially related matter, 1.9(b) applies to the lawyer’s former law firm’s representation of a client. Specifically, Rule 1.9(b) prohibits a lawyer, absent informed written consent, from knowingly being adverse to a client of her former law firm if the lawyer herself acquired confidential information about the former client while she still was with her former law firm—even though she may not have worked on the matter while at her former firm.
Rule 1.9(b) recognizes that a lawyer in a law firm may become privy to the confidential information of a firm’s client even if the lawyer did not personally represent the client in the same or a substantially related matter. This is sometimes referred to as the “water cooler” phenomenon. See, e.g., California Self-Insurers’ Security Fund v. Superior Court, 19 Cal. App. 5th 1065, 1078 (2018); see also Cal. Rules of Prof’l Conduct, 1.9, Executive Summary of the Commission for the Revision of the Rules of Professional Conduct (2018).
Note, however, that paragraph (b) of Rule 1.9 provides that a conflict of interest is only present when the lawyer involved has actual knowledge of confidential information protected under Business and Professions Code section 6068(e) and Rule 1.6. Thus, if a lawyer while with one firm was not personally involved in the representation and acquired no knowledge or information relating to a particular client of the firm, and that lawyer later joins another firm, neither the lawyer nor other lawyers in the hiring firm would violate the rules of professional conduct by representing another client in the same or a substantially related matter, even though the interest of the two client’s conflict. Cal. Rule of Prof’l Conduct 1.9, Cmt. 4.
Thus, if the conflict is present by virtue of a former firm’s representation, as opposed to the lawyer’s individual representation, an analysis of whether confidential information was obtained by the lawyer—notwithstanding that she did not work on the matter—must be performed. Typically, if the lawyer did not work on a matter at her old firm, she will not have obtained confidential information about the former client and will not bring any conflict with her to the new firm. Even if a conflict is present by virtue of the lawyer having obtained confidential information about the former client, however, the lateral hire’s new law firm may be able to still represent the new client if the former client provides informed written consent. Informed written consent must include written disclosure of the potential adverse consequences of the client consenting to the conflicted representation. It requires more than simply confirming in writing a discussion with the client wherein she consented to the conflict. Cal. Rule of Prof’l Conduct, 1.0.1(e)- (e-1).
Finally, with limited exceptions, Rule 1.9(c) prohibits a lawyer who has formerly represented a client in a matter from using or revealing protected information under Business and Professions Code section 6068(e) and Rule 1.6 to the disadvantage of the former client.
Rule 1.10 provides for imputation of a conflict to an entire law firm when one lawyer practicing alone would be prohibited from representing a client under Rule 1.7 or 1.9, unless an exception to the imputation rule applies. One possible exception to imputation is an ethical screen, which can defeat the presumption of imputation in very limited circumstances. Specifically, a law firm can take on or continue representation adverse to a lateral hire’s former law firm’s client if the lateral hire did not “substantially participate” in the matter while with her former firm. In addition, Rule 1.10 provides the prerequisites for an effective ethical screen, including that the lateral hire is timely screened and is apportioned no part of the fee from the tainted case; and that written notice is promptly provided to the affected former client. Cal. Rules of Prof’l Conduct 1.10 (a) (2).
The Rules of Professional Conduct thus necessitate an inquiry by the hiring law firm into the matters in which the lateral hire participated (or about which she otherwise obtained confidential information) while at her former firm to determine whether any conflicts exist that may be imputed to the hiring firm, and whether steps can be taken, including an appropriate ethical screen, to avoid imputation of the conflict.
To do so, many large law firms are utilizing a Risk Mitigation Form, similar to an employment application, to assist them in identifying such issues. Upon receipt and review of the application, general counsel should be charged with conducting a conflict check to identify “hits” that may cause issues. Once “hits” are identified, a conflict interview and investigation are often conducted by counsel to determine the extent of the lateral hire’s participation, whether any conflicts exist, and whether ethical screening and additional steps need to be taken—or even would be sufficient—before an offer of employment is extended. See James M. Fischer, Large Law Firm Lateral Hire Conflicts Checking: Professional Duty Meets Actual Practice, 36 J. Legal Prof. 167 (2011).
The hiring firm must be provided sufficient information to determine whether a prohibited lawyer’s previous participation was substantial. A number of factors should be considered, such as the lawyer’s level of responsibility in the prior matter, the duration of the lawyer’s participation, the extent to which the lawyer advised or had personal contact with the former client, and the extent to which the lawyer was exposed to confidential information of the former client likely to be material to the new firm’s matter. Cal. Rules of Prof’l Conduct, Rule 1.10, Cmt. 1.
There is a debate amongst ethicists as to whether the investigation into this matter itself violates the duty of confidentiality. Pursuant to Business and Professions Code section 6068(e)(1), it is the duty of a lawyer to maintain inviolate the confidence, and at every peril to herself to preserve the secrets, of her client. Rule 1.6(a) incorporates Section 6068(e)(1) into the Rules of Professional Conduct, thereby making it a disciplinary rule. Some ethicists have concluded that the information requested by conflict questionnaires is confidential information which should not be disclosed to the hiring firm. See e.g. James M. Fischer, supra, citing Paul R. Tremblay, Migrating Lawyers and the Ethics of Conflict Checking, 19 GEO J. Legal Ethics 489 (2006), and Eli Wald, Lawyer Mobility and Legal Ethics: Resolving the Tension Between Confidentiality Requirements and Contemporary Lawyers’ Career Paths, 31 J. Legal Prof. 199 (2007).
The State Bar’s ethics committee, COPRAC, has not addressed this issue directly, leaving California lawyers to turn to the American Bar Association for guidance. The ABA Committee on Ethics and Professional Responsibility, in Formal Opn. 09-455, interpreted the Model Rules and concluded that the moving lawyer and the prospective new firm have a duty to detect and resolve conflicts of interest and, to that end, concluded that while the rules generally protect confidential information (i.e., identity of clients and issues involved), disclosure of limited confidential information during the process of lateral moves is ordinarily permissible, subject to limitations. Specifically, the disclosure should be no greater than reasonably necessary to accomplish the purpose of detecting and resolving conflicts and must not compromise the attorney-client privilege or otherwise prejudice a client/former client. The ABA committee also concluded that the disclosure should not take place until serious discussions occur, and the acquiring lawyer should never use information for any purpose other than assessing conflicts. ABA Comm. On Ethics and Prof’l Responsibility, Formal Opn. 09-455. ABA Model Rule 1.6 has been amended to expressly permit disclosure of information pertaining to a client’s representation reasonably necessary to detect and resolve conflicts of interest arising from the lawyer’s change of employment. ABA Model Rule 1.6(b)(7). California’s articulation of Rule 1.6 did not adopt this language.
As a practical matter, and assuming the hiring firm is willing to rely on persuasive authority from the ABA, it is likely best practice for law firms to utilize some form of investigation to obtain salient information regarding the potential hire once the relationship gets serious, but at the same time limiting the information sought as much as possible. For example, the hiring law firm should consider limiting the requested information by asking only about those matters in which the lawyer participated, including a request for addresses of clients being listed to avoid causing “hits” for common names, and, in appropriate circumstances, including a request for the general subject matter of the representation. See, e.g., James M. Fischer, supra. The hiring law firm also may include a disclaimer advising the potential lateral hire not to provide information about a client in violation of the Rules of Professional Conduct.
Even apart from the conflict issues, hiring firms may want to use a questionnaire to gather the following information about potential lateral hires: prior employment, professional licenses, prior professional discipline or complaints, prior malpractice claims or judgments, prior billable requirements, practice needs, identification of clients the lateral hire expects to bring, identification of matters worked on by the lateral hire, identification of parties, lawyers, and venue on matters lawyer previously worked, identification of business interest(s) or financial interest(s) the lawyer has, identification of director or officer positions held by the lateral or her immediate family members. Id.
It is important for law firms to understand that review of a questionnaire alone will likely be insufficient to identify all issues. Once completed questionnaires are received, it is best practice for the hiring firm to complete a conflict check on identified cases, parties, and counsel to identify “hits” which will require further investigation. The investigation conducted may include both internal and external investigation. For example, if an existing lawyer in the hiring firm is working on a potentially affected matter, she will likely be positioned to supply relevant information to the conflict check team. In addition, the conflict check should likely include an interview with the lateral hire. Id.
In the final phase and likely before an offer is made, the hiring law firm should inquire about the level of participation in specific cases by the lateral hire to assess whether an ethical screen can assist the firm in avoiding imputation under Rule 1.10. This will require careful balancing of the duty of confidentiality. There may be times when a lateral hire cannot disclose the necessary information to assess conflicts without breaching the duty of confidentiality, at which point it is probably best practice to cease the hiring process for the candidate. Id.
Nicole Nuzzo is a partner with Bremer Whyte Brown & O’Meara, LLP. She has been designated as a Certified Family Law Specialist by the State Bar of California’s Board of Legal Specialization and is a member of the OCBA Professionalism and Ethics Committee. She can be reached at firstname.lastname@example.org.