July 14, 2011 Articles

Ten Notable Conflict-of-Interest Rulings from the Last Year (or So)

A website revision is definitely in order, but can you accomplish it without running afoul of the ABA Model Rules of Professional Conduct or their state counterparts?

By Nicholas B. Reuhs and Elizabeth H. Mykytiuk

Openwave Sys. v. Myriad France S.A.S.
2011 U.S. Dist. LEXIS 35526 (N.D. Cal. 2011)

The defendant sought to disqualify the firm representing the plaintiff in a contract dispute, citing representation of defendant in a related matter by an attorney that had since joined the firm representing the plaintiff. The court refused to disqualify, citing the presence of an ethical screen, the lack of any evidence demonstrating a sharing of client confidences, the prejudice of granting disqualification, and the defendant’s delay in raising the issue.

Banning Ranch Conservancy v. Superior Court of Orange County
193 Cal. App. 4th 903 (2011)

The defendant City attempted to disqualify the plaintiff’s counsel in a land-use dispute, claiming that it was a current client of that firm. Five years earlier, the city had retained the firm under an agreement that the law firm would provide legal services to the city on an “as-requested” basis, but conditioned such representation on the firm’s confirmation of its ability to take on the matter. The trial court granted the motion to disqualify, finding that the city remained the firm’s current client inasmuch as the firm provided no evidence that the retainer agreement was terminated or that it would expire on its own terms. The court of appeals reversed, concluding that the language of the retainer agreement was not susceptible to the suggested interpretation that the city remained a current client. Instead, the “as-requested” and “to be confirmed” provisions required the parties to agree to new attorney-client relationships on a matter-by-matter basis.

 

Wyeth v. Abbott Labs.
692 F. Supp. 2d 453 (D.N.J. 2010)

The court found that a law firm’s representation of the opposing litigant gave rise to a conflict of interest in violation of Rule 1.7. The court concluded, however, that the magistrate judge erred in holding that a violation of Rule 1.7 resulted in an automatic disqualification. In declining to disqualify the law firm, the court considered prejudice to each of the parties, access to confidential information relevant to the case, the cost and complexity of retaining and educating new counsel, and which party, if either, was responsible for creating the conflict.

 

XS Smith, Inc. v. Giordano, Halleran & Ciesla
Mon-L-440-08 (N.J. Law Div., Apr. 23, 2010)

The defendant’s expert witness had worked in the same firm as the plaintiff’s expert at the outset of the case. The plaintiff’s expert recalled discussing the matter with the defendant’s expert, although the defendant’s expert had no recollection of the discussion. The court concluded that the defendant’s expert should never have accepted the assignment. Having done so, his involvement was tainted by the confidential information that was relayed to him by the plaintiff’s expert and that conflict extended to defense counsel.

 

Rodriguez v. W. Publ. Corp.
2010 U.S. Dist. LEXIS 24155 (C.D. Cal. 2010)

The court found that incentive payment contemplated by retainer agreement created a conflict of interest between class representatives and other class members. Citing this conflict, the court refused to award class counsel any of the more than $10 million in fees, explaining that “representation of clients with conflicting interest constitutes an automatic ethics violation that results in the forfeiture of attorneys’ fees.”

 

City of Atlantic City v. Trupos
201 N.J. 447, 992 A.2d 762 (N.J. 2010)

A former client argued that a law firm’s representation of a municipality in defense of tax appeals during 2006 and 2007 was “substantially related” to the law firm’s prosecution of individual taxpayers’ 2009 tax appeals against the municipality. The court concluded that disqualification was unwarranted because the law firm did not receive confidential information from the city during the representation that could be used in prosecuting the tax appeals. In addition, the facts relevant and material to the law firm’s representation of the city were not relevant to its representation of the individual taxpayers.

 

Litigation Mgm’t, Inc. v. Bourgeois
2009 Ohio App. LEXIS 1913, 2009 WL 1347495 (2009)

Prior to this litigation, a first-year associate at the firm that represented the plaintiff billed 14 hours on a substantially related matter. The associate then moved to the firm currently representing the defendant. When the associate did so, the plaintiff moved to disqualify the firm. A partner at the firm representing the plaintiff testified that he had provided the associate with confidential information and legal strategy related to the case. The associate testified that she remembered none of that information. The court still disqualified the firm, finding that there was no evidence that the defendant’s counsel even attempted to set up a screen, leaving them unable to rebut the “presumption of shared confidences.”

 

O’Donnell v. Robert Half Int’l, Inc.
641 F. Supp. 2d 84 (D. Mass. 2009)

The court disqualified the plaintiffs’ counsel on the eve of trial after determining that an associate that transferred from the defense firm to the plaintiffs’ firm had worked on the matter that was to be tried, although she had billed only 7.2 hours and had no recollection of doing any work related to the case.

 

Metropolitan Life Ins. Co. v. The Guardian Life Ins. Co. of America
2009 U.S. Dist. LEXIS 42475, 2009 WL 1439717 (N.D. Ill. 2009)

The defendant requested that a firm run a conflicts check to determine its availability for the instant case. The conflicts check revealed that the firm had represented the plaintiff in a number of unrelated matters. The firm had completed all tasks on those matters, although it had not formally terminated the representations. The firm accepted the representation and the plaintiff moved to disqualify. The plaintiff argued that the firm violated the “hot potato doctrine.” This doctrine bars an attorney from representing a more lucrative client in a case against a less lucrative client, which the attorney dropped like a “hot potato” when the more lucrative client came along. The court specifically held that the firm violated Rule 1.7. However, the court declined to disqualify the firm, finding that there was no harm to the plaintiff and that the “hot potato doctrine” does not apply “in those instances in which a lawyer’s representation is sporadic, non-litigious and unrelated to the issues involved in the newer case. . . .”

 

Sanford v. Commonwealth of Virginia
687 F. Supp. 2d 591 (E.D. Va. 2009)

Various hospital employees were all represented by the same defense counsel in a wrongful-death action. The plaintiffs claimed that a non-waivable conflict existed because of a substantial discrepancy in the parties’ testimony and an incompatibility in their positions. The court granted the motion, concluding that while counsel may have staked out positions that they thought were best for the defense of the case as a whole, they had not considered how those positions would affect the ability of each defendant to mount a defense as an individual. The court also concluded that the consent purportedly obtained from each defendant was ineffective as a matter of law because the attorneys “reasonably could have believed that, under the circumstances of this case, they could represent all of the defendants whom they undertook to represent.”

 

Nicholas B. Reuhs practices with Vorys, Sater, Seymore and Pease LLP in Washington, D.C., and serves as a chair of the Ethics and Professionalism Committee's Conflicts of Interest Subcommittee. Elizabeth H. Mykytiuk practices with Vorys, Sater, Seymore and Pease LLP in Washington, D.C. and is a member of Ethics and Professionalism Committee.

 


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