December 1, 2010

Practicing Senior Lawyer: Current Ethics Bytes for the Busy Senior Practitioner

By The Ethics and Professionalism Committee

Noted below are brief descriptions of four recent devel- opments in the areas of ethics and professionalism that our Committee thought would be relevant to almost all members of the Division. If you have any questions on the topics raised, please contact Marvin Karp (mkarp@ ulmer.com) or Al Harvey (harveya@thomasonlaw.com).

Presumption That Lawyer Required Confidential Information  of  His  Former  Firm’s  Client  is  Rebuttable   A recent Fifth Circuit decision—In the Matter of Pro- Education International, Inc.  v.  Mindprint,  Inc.,  2009 WL 348940—has ameliorated concerns in Texas and else- where over the extent to which the confidences of a law firm’s clients can be imputed to a lawyer who leaves that firm. ABA Model Rule 1.9(a) provides that a lawyer:

shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was asso- ciated had previously represented a client (1) whose interests are materially adverse to that person; and (2) about whom the lawyer had acquired information protected by Rules 1.6 and 1.9(c) that is material to the matter; unless the former client gives informed consent, confirmed in writing.

In applying a similar Texas rule (Rule 1.09), a bankruptcy court and a U.S. District Court held that a law firm’s knowledge of a client’s confidences “extends to former employees.” Those courts therefore ruled that an associate who switched law firms (along with all other lawyers in the new firm) was disqualified from participating in an adversary proceeding against a client of the associate’s former law firm. In so holding, the two courts refused to allow the associate to present evidence that he had never worked for the client or received any confidential information about the client while at his former firm. The courts reasoned that the associate was “irrebuttably presumed to have acquired all confidential communications of clients of the [original] firm.”

However, on October 30, the Fifth Circuit rejected the “irrebuttable presumption” theory and reversed the disqualification order. The Court pointed out that both Texas Rule 1.09 and ABA Model Rule 1.9 require that a departing lawyer must have actually “acquired” confidential information about the former firm’s client, or personally represented that client, in order to be disqualified. Therefore, when the associate ended his affiliation with his former law firm, under “both the Texas Rules and the ABA Model Rules, [the associate] should have had the opportunity to demonstrate that he did not obtain confidential information regarding [the client] during his time” there. Because the associate did in fact proffer such evidence, his representation “did not present a conflict of interest requiring his disqualification.”

Summary Judgment for the ABA in the “Red Flags Rules” Lawsuit

In October, the U.S. District Court for the District of Columbia issued an order enjoining the Federal Trade Commission (FTC) from enforcing its so-called “Red Flags Rules” against law firms. Those rules, adopted by the FTC as an amendment to the Fair and Accurate Credit Transactions Act of 2003, require “financial institutions” and “creditors” (defined as entities that regularly extend or renew credit) to “develop programs identifying, detecting, and responding to warning signs (‘redflags’) of identity theft.” The FTC had taken the position that these rules should apply to lawyers because the fact that lawyers allow their clients to pay for services on account makes lawyers “creditors” under the act.

In seeking to enjoin the enforcement of the “Red Flags Rules” against lawyers, the ABA argued that a lawyer “does not ‘regularly extend’ credit merely by providing services to a client in advance of billing for those services. In fact, state rules of professional conduct generally prohibit lawyers from receiving compensation before services are rendered.”

On October 29, Judge Reggie Walton granted a partial summary judgment in favor of the ABA, concluding that Congress did not intend to “regulate lawyers when these statutes were enacted.”

What Confidential Information May Be Disclosed When a Lawyer Seeks to Change Firms?

When Lawyer A prepares to move from law firm XYZ to law firm ABC, both the moving lawyer and ABC must determine whether any of the clients that the lawyer hopes to bring with him from his previous firm have conflicts with ABC’s existing clients. Will, however, the lawyer’s disclosure of the identity of his clients prior to actually making the move constitute a violation of Model Rule 1.6(a), which renders confidential “all information, relating to the representation, whatever its source”?

In a recently published opinion, the ABA Standing Committee on Ethics and Professional Responsibility held that it does not. “In most situations involving lawyers moving between firms,” states Formal Opinion 09-455 (10/8/09), “lawyers should be permitted to disclose the persons and issues involved in a matter, the basic information needed for conflicts analysis.” However, continued the opinion, such “permissive disclosure” is limited in scope and “should be no greater than reasonably necessary to accomplish the purpose of detection and resolution of conflicts of interest.”

Indeed, in many cases, “simply comparing client lists on the general nature of the practices of the moving lawyer and the prospective new firm will reveal the absence or presence of potential conflicts without the need for additional discussion.” Nevertheless, in some situations, more detailed information may have to be disclosed. For example, such additional disclosure would be necessary in order to determine whether there is a “substantial relationship” between two matters for purposes of Rule 1.9 (conflicts between a current client and a former client).

The Launching of Ethics 20/20

Less than seven years after the ABA House of Delegates approved numerous amendments to the Model Rules of Professional Conduct that had been recommended by the Ethics 2000 Commission, ABA President Carolyn

B. Lamm has created a “Commission on Ethics 20/20.” The charge of this new Commission is to review all of the Model Rules and to propose amendments in light of changes in technology and legal practice.

The Commission has already identified three over-arching subject areas for study:

  • State/country-based regulatory rules affecting multinational legal practice;
  • The impact of technology on multijurisdictional practice; and
  • The impact of developments in technology on how lawyers and clients relate to each other and how lawyers practice.

According to Co-Chairs Jamie S. Gorelick and Michael Traynor, the Commission expects its work to take three years. Year One will consist of research, outreach, and analysis of information regarding critical issues identified in each of the three major subject areas; Year Two will focus on development of proposed policies, principles, and, if necessary, model rules for wide circulation and comment; and Year Three will involve continued vetting of proposals and presentation of recommendations to the ABA House of Delegates.

The Commission will post on its Web site information regarding Commission activities. ABA members are encouraged to sign up, via the Web site, for the Commission’s discussion Listserv. Subscribers will then receive periodic updates on the issues being presented to the Commission; learn when and where the Commission will be holding meetings, public hearings, and educational programs; and will ultimately receive the Commission’s draft proposals for comment. Subscribers can also submit recommendations for Commission consideration via the Listserv.


For further information, contact Commission Counsel Ellyn S. Rosen at rosene@staff.abanet.org.