by Suzanne Burke Spencer
A conflict of interest that prohibits one lawyer from representing a client in a matter generally prohibits by imputation all other lawyers in the same firm from representing that client. Problems with this imputation of conflicts may arise when a lawyer joins a new firm. What if the new firm wants to represent, or is already representing, a client adverse to the new lawyer’s former client? Are the attorneys at the new law firm (who had no involvement with new lawyer’s representation of the client at the former firm) also now prohibited from representing the adverse client because the new lawyer’s conflicts are imputed to them? Enter the ethical screen.
Ethical screening refers to the practice in which law firms attempt to isolate or screen off an attorney—usually a new attorney—who has a prohibited conflict of interest based on the new attorney’s former representation of a client at her prior law firm. And while screens are regularly used by many California firms, particularly large, multi-office firms, California has never expressly permitted ethical screening in its Rules of Professional Conduct. And while ethical screening of private-sector lawyers has been found adequate to avoid vicarious disqualification by one California state court and some federal courts in California, the standards for disqualification, discipline, or even civil liability differ.1 Thus, attorneys in California presently employ ethical screens to address imputed former client conflicts at their own risk. That, however, could shortly change.
On March 30, 2017, the California State Bar submitted to the California Supreme Court a new set of proposed Rules of Professional Conduct. Those proposed rules include a version of ABA Model Rule 1.10, which, if adopted as proposed, will expressly permit ethical screening in California under certain circumstances. California’s proposed Rule 1.10 is narrower than, and unlike, any other articulation of Model Rule 1.10 in any of the other thirty-two jurisdictions that have adopted it. The proposed rule, however, still appears to go farther than California courts have previously gone and appears inconsistent with the law as it presently stands, making its fate unclear.
California Courts Have Been Slow to Adopt Ethical Screening
Under well-established California law, lawyers are not permitted to represent a client on one side of a dispute and later represent the client’s adversary in the very same dispute. In addition to these so-called side-switching cases, lawyers also are prohibited from representing a client adverse to a former client in any case if the attorney acquired in the former representation confidential information material to the later representation. Cal. Rules of Prof’l Conduct, Rule 3-310(E). In applying this Rule, to avoid intrusion into the attorney-client relationship, courts do not require the former client to disclose the confidential information the attorney has, but rather presume that the attorney possesses material confidential information if the later matter is substantially related to the former matter. And if the lawyer was directly involved in the prior representation, the presumption that the lawyer obtained the former client’s confidential information is irrebuttable, and that attorney is prohibited from representing the later client. See Jessen v. Hartford Cas. Ins. Co., 111 Cal. App. 4th 698, 709-10 (2003).
Also under California law, the general rule is that an individual attorney’s conflict will be imputed to the entire firm because receipt of confidential information by all lawyers in the firm is also presumed. What is unsettled is whether the firm is automatically disqualified from representing the client in the later matter, or whether the presumed receipt of confidential information can be rebutted on a case by case basis, including by using an ethical screen.
Originally, California cases seemed to hold that whether an entire firm must be disqualified if one attorney with the firm previously represented an adverse party in the same or a substantially related matter would be determined on a case-by-case basis. In 1992, however, the Henriksen court held that where an attorney switches sides in the same case, the new firm is automatically disqualified, even if the new firm takes steps to screen the side-switching attorney. Henriksen v. Great Am. Sav. & Loan, 11 Cal. App. 4th 109, 115 (1992). In 1994, the Supreme Court extended the automatic rule of Henriksen beyond side-switching cases, to encompass cases in which the prior representation was not in the same case, but rather in a substantially related one. Flatt v. Super. Ct., 9 Cal. 4th 275, 283 (1994). Flatt has often been cited as shutting the door on the ability to rebut the presumption of vicarious disqualification. Once a client establishes that a prior matter is substantially related to a subsequent one, “disqualification of the attorney’s representation of the second client is mandatory; indeed, the disqualification extends vicariously to the entire firm.” Id. However, the issue of whether vicarious disqualification is automatic in the context of substantially related matters was not directly before the Flatt Court. The Supreme Court has not since taken up that issue expressly in any later case. In 1999, however, the Supreme Court in SpeeDee Oil, again in dicta, expressly declined to determine whether ethical screening could rebut the presumption of shared confidences in that case because no evidence of such screening was proffered. People v. SpeeDee Oil Change Sys., Inc., 20 Cal. 4th 1135, 1151-52 (1999). Thus, the Supreme Court appeared to open the door to at least the possibility that it could.
One California court, in Kirk v. First Am. Title Ins. Co., 183 Cal. App. 4th 776 (2010), has walked through the door left open in SpeeDee Oil, expressly approving ethical screening under very narrow circumstances. In that case, an attorney, while with a prior employer, was contacted by class action plaintiffs’ counsel to be a consultant on the case. The two had a seventeen-minute conversation in which confidential information about the cases was shared. The putative consultant thereafter declined the engagement and received no further confidential information. The would-be consultant attorney thereafter joined the San Francisco office of a large law firm. About one month later, defense counsel in the class actions joined the same large firm, albeit in different offices of that firm (Los Angeles and St. Louis). An ethical screen was immediately erected around the consultant attorney who had been contacted by plaintiffs’ class action counsel. Under those somewhat unique circumstances, the Kirk court held that an ethical screen could rebut the presumption that confidential information was shared between the attorney contacted by plaintiffs’ counsel and the defense team who later joined the firm. Id. at 814.
Since then, no California published decision has weighed in on whether the presumption of vicarious disqualification can be rebutted by an ethical screen, but some post-Kirk federal courts in California have acknowledged Kirk’s holding, with a handful finding the established ethical screen rebutted the presumption.
California’s Proposed Rule 1.10 Goes Further to Permit Ethical Screening Than California Courts Have Yet Gone
Against this backdrop, the California State Bar, first in 2010-12 and then again in 2016, considered whether to propose a disciplinary rule expressly authorizing ethical screening. Unlike in 2010-12, the State Bar has now proposed adoption of a version of Rule 1.10. California’s proposed Rule 1.10 provides that 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 the tainted lawyer (1) did not “substantially participate” in the prior matter, (2) is timely screened from participating in the current matter and receives no portion of the fee therefrom, and (3) written notice is provided to the former client. The consent of the former client is not required.
The proposed Rule differs from existing California law in three primary ways. First, it creates a “substantially participate” threshold not previously articulated in California or in any other jurisdiction that has adopted some form of Rule 1.10. The involvement of the screened attorney in the Kirk case, which is the only published California case that has expressly permitted screening of private-sector lawyers, can accurately be described as de minimus: a seventeen-minute telephone call with counsel for the plaintiffs about a potential consulting role. The phrase “substantially participate,” while not defined in the proposed Rules or by California case law, would seem to permit screening where more than the de minimus involvement of the lawyer in Kirk is present.
Second, outside the context of side switching (which triggers an irrebuttable presumption), California courts have favored a case-by-case analysis of whether the presumption of receipt of confidential information by the entire firm can be rebutted. See Castaneda v. Superior Court, 237 Cal. App. 4th 1434, 1449 (2015); Kirk, 183 Cal. App. 4th at 800. By contrast, California’s proposed Rule in effect creates a per se rebuttal of the presumption if an attorney has not “substantially participated” in the representation at the prior firm. Thus, in all cases in which the attorney has not substantially participated in the representation at the prior firm, the presumption of imputed knowledge would be rebutted by an ethical screen that complies with the requirements for such screens. However, there is no per se rule in the existing body of California case law that ethical screening will rebut the presumption of imputation in all cases of a certain type, e.g. where an attorney did not “substantially participate” in the representation while at the former firm. A gap is thus potentially created between the disciplinary standard articulated in proposed Rule 1.10 and California case law.
A more significant, third gap is created between proposed Rule 1.10 and California law with respect to side switching. The only articulation under California law of when ethical screening may be permitted comes from Kirk: “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, 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.” Kirk, 183 Cal. App. 4th at 814; see also City Nat’l Bank v. Adams, 96 Cal. App. 4th 315, 328-29 (2002) (side switching implicates violations of the duty of loyalty, which cannot be remedied by screening). Under proposed Rule 1.10, however, even an attorney who was “actually involved” in the prior representation, but at some level less than “substantial” participation, can be screened by the law firm to avoid the presumption of imputed knowledge. This is contrary to existing California law.
The proposed disciplinary rule, then, could present a trap for the unwary because of the inconsistencies between it and existing case law. “Generally speaking, . . . the Rules of Professional Conduct govern attorney discipline; they do not create standards for disqualification in the courts.” Kirk, 183 Cal. App. 4th at 792. Thus, if Rule 1.10 is adopted as proposed, discipline could be avoided, for example, if a timely and adequate screen is established around an attorney switching sides in the same case by joining a firm that represents the adverse party. But disqualification or even civil liability may not similarly be avoided because existing case law does not permit any side switching and imputation is automatic under such circumstances. On the other hand, the Supreme Court could take this opportunity to endorse ethical screening by adopting Rule 1.10 as proposed, and case law may evolve to permit side-switching although previously prohibited. For now, however, the fate of the proposed Rule—and the circumstances in which ethical screening may be used in California—remains unclear.
ENDNOTE
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 Chair of the State Bar of California’s Standing Committee on Professional Responsibility and Conduct (COPRAC) and Co-Chair of the OCBA’s Professionalism & Ethics Committee. The views expressed herein are her own.