January 01, 2016

Scruples: Substantially Related Matters and Ethics Screens

Although many states permit screens to avoid imputation when a lawyer changes firms, the screening must still be done correctly.

Michael Downey

Approaching Ethox at lunch, Paradox said, “I need more guidance. Earlier, I shared that we represent Wife in a divorce. Nemesis represents Husband. Then we learned a lawyer has joined Nemesis’s firm who previously represented Wife in a business dispute.”

“Oh, yes,” Ethox mumbled between chews.

“Investigating further,” Paradox proceeded, “I confirmed the business dispute has ended. So Wife is a former client of Nemesis’s colleague and is now adverse to a Nemesis client, Husband. You told me this was a Rule 1.9(a) conflict, and that we needed to determine whether the matters are substantially related. I think they are.”

Smiling, Paradox elaborated, “Wife shared all her financial information with the lawyers representing her in the business dispute, including Nemesis’s new colleague. Wife also says those lawyers advised her on steps she could take—and did take—to protect herself after Husband threatened divorce during the business dispute.”

“The matters sound substantially related,” Ethox agreed. “The information Nemesis’s colleague received and the advice that colleague provided seem relevant to the divorce.”

“I emailed Nemesis describing the conflict,” Paradox related. “It told Nemesis that, because the prior representation of Wife was imputed to Nemesis’s entire firm under Model Rule 1.10, Nemesis had a disqualifying conflict and could not represent Husband.”

Seeing Ethox nod affirmatively, Paradox continued, “Nemesis refuses to withdraw, claiming they set up a Chinese wall.”

“No one calls them ‘Chinese walls,’” Ethox responded. “The proper name is an ‘ethics screen,’ which is defined in Rule 1.0(k) as a set of procedures that isolate a conflicted lawyer from participating in a matter and protect any confidential information that gave rise to the conflict.”

“I thought a screen only worked with client consent,” Paradox responded.

“There are screens that are known as ‘consensual screens,’” Ethox answered. “A firm uses a consensual screen to convince a client to waive a conflict. The terms of the screen are normally set by agreement with the client providing the conflict waiver.

“Nemesis, however, is referring to a ‘non-consensual’ screen,” Ethox continued. “Certain ethics rules permit a law firm to use a screen without Wife’s consent to avoid imputation of the conflict arising from the lateral hire’s former representation of Wife. ‘Non-consensual’ screens are permitted only in two types of situations.”

Ethox listed them: “First, are situations where no real lawyer-client relationship existed. The person with the conflict may not have been a lawyer when doing work for the former client. Or a prospect never actually became a client. Rule 1.10 comment [4] and Rule 1.18 allow non-consensual ethics screens to prevent imputation of conflicts in those circumstances.

“Second,” Ethox continued, “are circumstances where a lawyer changes jobs. If a person was a judge or neutral and then joins a firm, or enters or leaves government service, Rules 1.11 and 1.12 may permit a firm to use an ethics screen to prevent imputation of a conflict. Finally, since February 2009, Model Rule 1.10 has permitted firms to establish ethics screens and thus avoid imputation of conflicts when a lawyer moves between two private firms.”

“So,” Paradox expressed disappointment, “Nemesis can still be adverse to Wife?”

“Not necessarily,” Ethox answered. “Although many states permit screens to avoid imputation when a lawyer changes firms, the screening must still be done correctly. The screen must employ reasonable procedures and be timely erected. Also, if a state has adopted the Model Rule 1.10(a)(2) screening provision, the firm must provide notice of the screen and certify the screen’s effectiveness on an ongoing basis.”

“I finished lunch,” Ethox concluded. “Why don’t I follow you back to your office, and we can try to figure out if Nemesis’s firm really has erected a proper ethics screen.”

Michael Downey

The author is a legal ethics lawyer at Downey Law Group LLC, St. Louis. He has also taught legal ethics at Washington University and St. Louis University.