by Carole J. Buckner
Law firms make scrupulous efforts to avoid conflicts of interest when opening new matters or bringing in new clients. Resolving conflicts of interest is sometimes “like a war,” one partner at a large firm recently told me. Situations in which a lawyer associated with a firm previously represented an adverse party while at a prior firm are not unusual. Such scenarios mandate timely effective implementation of an ethical screen. A law firm’s implementation of such measures, in turn, depends upon the firm’s knowledge regarding an attorney’s previous representations of an adverse party including the relatedness of those matters to the current case.
The firm must rely on representations of the attorney involved in the prior matter as to the scope of the attorney’s involvement in previously representing the now adverse party and the relatedness of the matter to the current representation. The attorney’s prior involvement on behalf of the now adverse party may or may not be substantially related to the current case. The attorney’s prior work for the now adverse party may be limited or extensive. The analysis at the inception of the matter may not jive with the court’s scrutiny of prior billings and emails generated by the lawyer in the prior representation when examined in hindsight by the court on a motion for disqualification.
Assuming accurate disclosure by the attorney, and recognition of the former client conflict, timely screening can follow. Ethical screening remains somewhat uncertain in California: it is not yet recognized by the California Supreme Court in the private firm/non-governmental lawyer context and there is currently no rule on the books. Firms following the guidance set forth in Kirk v. First American Title Ins. Co., 183 Cal. App. 4th 776 (2010) may find courts leaning toward imposing the more meticulous requirements of ABA Model Rule of Professional Conduct 1.10.
Even assuming that a law firm deals with these issues effectively, a firm’s best efforts may not avoid conflicts of interest that are not equally and effectively addressed by the firm’s co-counsel in a given case. Three recent cases illustrate the parameters of disqualification of counsel based not upon the firm’s own conflicts of interest, but rather based upon conflicts of interest imputed from separate and independent co-counsel. In Beltran v. Avon Prods., Inc., 867 F. Supp. 2d 1068 (C.D. Cal. 2012), the court disqualified two law firms representing plaintiffs in a class action, imputing one firm’s conflict of interest to the other firm. In Canatella v. Krieg, Keller, et al., 2012 WL 847493 (N.D. Cal. 2012), the court rejected a request to disqualify the State Bar’s Office of General Counsel based on a conflict of interest imputed from co-counsel. Most recently, in j2 Global Comm. v. Captaris, 2012 WL 6618272 (C.D. Cal. 2012), the court imputed a conflict of interest between separate co-counsel, resulting in disqualification of co-counsel. A closer look at these three cases reveals some missteps best avoided.
California Rule of Professional Conduct 3-310(E) governs former client conflicts of interest, providing that a member shall not, without the informed written consent of the client or former client, accept employment adverse to the client or former client where, by reason of the representation, the member has obtained confidential information material to the employment. As a general rule, where an attorney is disqualified from representing a client due to a conflict of interest, absent screening (discussed below), the attorney’s entire law firm is also disqualified. William H. Raley Co. v. Superior Court (Carroll), 149 Cal. App. 3d 1042, 1049 (1983). This is true regardless of the size of the firm and irrespective of geographic location. Truck Ins. Exchange v. Fireman’s Find Ins. Co., 6 Cal. App. 4th 1050, 1059-60 (1992); Flatt v. Superior Court (Daniel), 9 Cal. 4th 275, 286 (1994). When one firm works together with a separate and distinct law firm on the joint representation of a client, the disqualifying conflict of interest of one firm may or may not be imputed to the second separate firm.
In Beltran, attorney Frank worked for six years on three significant cases for Avon, billing 300-plus hours and over $100,000. 867 F. Supp. 2d at 1072. Two cases involved class action consumer fraud claims, and the third involved products liability. Frank then joined the Eagan firm. The Eagan firm represented plaintiff Beltran in a class action consumer fraud matter against Avon. The Eagan firm screened Frank off of the matter two weeks after filing the complaint. The firm did not give written notice of the screening to Avon. In handling the Beltran matter, the Eagan firm worked alongside co-counsel X-Law Group. Id. at 1074.
Avon moved to disqualify Eagan and X-Law Group, asserting that Frank’s conflict of interest arising from his former representation of Avon in substantially related matters was not only imputed to the Eagan firm, despite the screening measures, but also to X-Law Group. Id. at 1082. The court conducted an in camera inspection of Frank’s unredacted time records pertaining to his representation of Avon. Applying the California Rules of Professional Conduct, the court disqualified both firms, holding that although Frank was not part of the litigation team, his conflict of interest was imputed to the Eagan firm, as well as to X-Law Group. Id. at 1084. The court found the class action context of the case significant, given that class counsel must satisfy rigorous integrity standards. Id.
Notably, the Beltran court held that as a matter of law the ethical wall was not sufficient to overcome the possession of confidential information by the segregated attorney except in very limited situations involving former government lawyers. Id. The court did not cite Kirk, 183 Cal. App. 4th at 794, a California case which recognized the use of an ethical wall to resolve former client conflicts of interest in some scenarios arguably extending beyond the government lawyer context. Rather, the Beltran court cited the ABA Model Rules of Professional Conduct, and faulted plaintiff’s counsel for its failure to give written notice of screening to Avon as required under ABA Model Rule 1.10(a)(2)(ii). 867 F. Supp. 2d at 1083. In contrast, the Kirk court, while citing ABA Model Rule 1.10 in discussing notice to the former client, stated that “notice is not an element required in all cases in order for an ethical wall to rebut the presumption of imputed knowledge and prevent disqualification of the law firm.” 183 Cal. App. 4th at 813 n.36. Most significantly, the Beltran court found the implementation of the ethical wall two weeks after the filing of the complaint to be untimely. 867 F. Supp. 2d at 1083.
In disqualifying both the Eagan firm and X-Law Group, the Beltran court expressed doubt that an ethical wall could be implemented and maintained given the “close proximity of the attorneys working together in one office” with fewer than ten attorneys, and the X-Law Group’s having only four attorneys, two of whom already collaborated with the Eagan firm. Id. However, screening has been accepted in smaller firms as reflected in In re County of Los Angeles, 223 F.3d 990 (9th Cir. 2000) (permitting effective ethical wall in a three-person law firm to avoid disqualification). The Beltran court did not address the County of Los Angeles case or distinguish the situations factually.
A Northern District California court came to just the opposite conclusion in Canatella, where the court rejected a request to disqualify co-counsel based on imputation of a former client conflict of interest. 2012 WL 847493 at *3. In Canatella, attorney Wagstaffe of Kerr and Wagstaffe (K&W) represented the plaintiff in a case in which plaintiff was sanctioned, billing 7.6 hours over a period of 4 days, in 1999. Id. at *1. In 2011, after the California State Bar notified the plaintiff that he was under investigation in connection with another matter in which monetary sanctions were imposed on plaintiff, plaintiff sued the State Bar. K&W worked as co-counsel with the State Bar’s Office of General Counsel (OGC) on a motion to dismiss plaintiff’s case. Id. At some point, K&W, presumably recognizing the conflict of interest, withdrew from representing the State Bar. Id. Plaintiff then moved to disqualify the OGC, on the grounds that K&W’s conflict of interest arising from its prior representation of plaintiff should be imputed to the OGC. Id. at *2. Here, the court held that disqualification was not required. Id. at *3.
The court held that the two matters were “substantially related” because the 1999 matter and the current litigation “both involve legal problems surrounding sanction orders issued by trial judges after plaintiff’s purported courtroom misconduct.” Id. Finding “no California case” on point, the court cited Fund of Funds, Ltd. v. Arthur Anderson & Co., 567 F.2d 225 (2nd Cir. 1977). Id. at *2. The Canatella court found:
... where two independent lawyers or law firms perform work for a common client on the same matter, one lawyer’s or law firm’s conflict of interest ordinarily will not be imputed to the other lawyer or firm. ... However, where the two lawyers or law firms ... [were] working together very closely and sharing confidential client information, one lawyer’s or firm’s conflict may result in disqualification of the other lawyer or firm. Id.
Relying on In re Airport Car Rental, 470 F. Supp. 495, 505 (N.D. Cal. 1979), the Canatella court laid out a three part test for determining whether disqualification of co-counsel was warranted: (1) extent of the initial contact between the client and counsel; (2) evidence that the attorney shared any of the client’s confidential information with co-counsel; and (3) evidence that co-counsel associated with the disqualified counsel because of the disqualified counsel’s prior relationship with the client. Id.
On the first factor, the court found that attorney Wagstaffe’s client contacts in the initial matter were brief. Id. This distinguishes Canatella from the Beltran facts. As to the second factor, the sharing of confidential information, the court further determined that, “plaintiff provides no evidence that Attorney Wagstaffe or K&W shared any confidential information with OGC.” Id. The court did not explain how plaintiff might have provided evidence of the sharing of confidential information between adverse co-counsel, other than to conclude summarily that it was unlikely that any sharing of confidential information occurred, given the “unrelated” nature of the two different representations. Id. At the same time, in contradiction, the court found that there was a “substantial relationship between the former and current lawsuits.” Id. While the Beltran court assumed without requiring evidentiary proof that the two law firms representing the plaintiff had engaged in extensive discussion about the case (867 F. Supp. 2d at 1082), the Canatella court placed a burden on the movant seeking disqualification to produce evidence of sharing of confidential information between his former counsel and his current adversary (2012 WL 847493 at *2). That proved to be a showing the plaintiff could not make.
On the third factor, the court held there was no “evidence” that OGC had intentionally associated in K&W because of its prior representation of the plaintiff. Id. This factor might also present a challenge to movants seeking disqualification. Such knowledge ordinarily would involve evidence not available to the former client. As a result, the court held that OGC need not be disqualified. Id. at *3.
Most recently, in the j2 Global decision, the Central District again addressed imputation of conflicts of interest between co-counsel. 2012 WL 6618272 at *1. An attorney represented j2 Global while associated with the Kenyon firm over a period of three years as a “junior associate,” billing over 200 hours time in over fifteen months on three patent related matters, involving three of the four patents at issue in the current case. Id. at *2. The attorney then joined the Crowell firm, which assigned him to work as in-house counsel for defendant Open Text, a client known to be adverse to j2. Id. Crowell knew of the attorney’s prior representation of j2 at the time the firm assigned the lawyer to represent Open Text, and cleared the conflict. Id.
In the new patent infringement cases, Perkins Coie served as co-counsel with Crowell, representing defendant Open Text and several other defendants in defense of three patent infringement cases brought by j2. Id. at *3. j2 moved to disqualify Perkins on the grounds that the Crowell attorney representing Open Text had previously represented j2 in reference to three of the patents at issue, and had “contact with Perkins.” Id. The court disqualified Perkins, noting that “there is not a molecule of evidence that Perkins did anything other than act with integrity and in a manner consistent with the highest traditions of the legal profession.” Id. at *11.
In j2 Global, in evaluating the scope of the prior representation, the court considered emails and billing records of the Crowell attorney who had previously represented j2. Id. at *7. Crowell assigned the attorney to represent Open Text in part because (1) he was a “junior associate” when he had represented j2, (2) he did not recall having access to confidential information while representing j2, and (3) he primarily reviewed publicly available information. Id. The court found these assertions inconsistent with the 120 emails and billing entries by the Crowell attorney, which showed involvement in evaluations for settlement, drafting pleadings and formulating discovery strategy, drafting discovery, and opposing a motion for summary judgment on behalf of j2. Id.
The court also faulted the conflict of interest disclosure made by the Crowell firm to j2 in that j2 was not requested to sign a conflict letter allowing the Crowell attorney to work for Open Text. Id. at *8. In addition, the disclosure by the Crowell attorney to Open Text’s general counsel, indicating that the attorney had “performed a public art search” relating to a particular patent, did not convey to Open Text’s general counsel that the attorney had previously worked for j2. Id. at *9.
Disqualifying Perkins, the court found that the Crowell attorney’s contacts with Perkins while representing Open Text included meetings with Perkins and assisting Open Text with gathering Open Text documents for Perkins regarding discovery requests. Id. at *10. The court presumed that the Crowell attorney had confidential information about j2, noting that “a de minimis level of involvement with a prior case is sufficient for presuming that an attorney acquired confidential information about the prior case.” Id. The court then determined that the Crowell attorney’s former representation of j2 was substantially related to the representation of Open Text, given the same three patents were involved. Id.
Considering whether the Crowell attorney’s knowledge should be imputed to Perkins, the court presumed that Perkins had the same confidential information about j2 as did the Crowell attorney. In doing so, the court rejected Canatella’s multi-factor analysis in favor of application of the “Vicarious Presumption Rule”—in essence, finding that Perkins’ possession of confidential information should be presumed. Id. at *8. Finding the presumption irrebuttable, the court found Perkins’ disqualification mandatory. Id. at *11.
Of the three cases above, j2 Global is well-reasoned and most thoroughly applies existing California law. Arguments based on Canatella’s multi-factor approach, which places difficult evidentiary burdens on the movant, are inconsistent with the California authority cited in j2 Global. In contrast, the presumptions that firms serving as co-counsel normally will share confidential client information, as utilized in both Beltran and j2 Global, are well-reasoned. While the Beltran decision comes to the right result, its reliance on ABA Model Rule 1.10, which is not adopted in California, causes concern. Absent adoption of a rule on screening in California, courts may default to the ABA Model Rules. ABA Model Rule 1.10 requires (1) prompt and detailed notice of ethical screening to the former client setting forth the screening procedures employed, (2) informing the former client of the ability to seek review of the screening in court, (3) ongoing certification to the former client at periodic intervals confirming that the screen remains in place, and (4) notification to the former client when screening is terminated.
In addition, Beltran’s suggestion that ethical screening cannot be implemented in small firms may trouble some practitioners. While understandable as a practical concern, the County of Los Angeles case is to the contrary. ABA Model Rule 1.10 does not restrict smaller firms or smaller offices from screening, although Comment  to ABA Model Rule 1.10 cautions that “Lawyers should be aware . . . that, even where screening mechanisms have been adopted, tribunals may consider additional factors in ruling upon motions to disqualify a lawyer from pending litigation.” Arguably Beltran’s consideration of the propriety of screening in a class action case involving smaller firms or smaller law offices is such an “additional factor.” Future cases will further define the guidelines for disqualification of co-counsel based on imputed conflicts of interest.
Carole J. Buckner is the Chief Academic Officer of Abraham Lincoln University and Dean of the School of Law and principal at Buckner Law Corp. She serves as co-chair of the OCBA’s Professionalism & Ethics Committee. She can be reached at firstname.lastname@example.org.