You work in a small firm that concentrates its practice in probate and real estate matters. You have been there for several years. Lately, things have been slowing down, and you have not been happy with the types of work you have been asked to do. You have been thinking about moving on to a different firm.
You currently represent a client in a probate matter where one of the other parties in interest is represented by a firm whose lawyers and work product you have long admired. Based on your interactions with members of the firm both on bar committees and in court, you get the distinct impression that the feeling is mutual, and that they would be open to having you join their firm.
You would like to send this firm your resume, but you have some serious reservations about the ethical implications of doing so. Specifically:
- Since you are negotiating for employment with a firm that represents clients who have interests adverse to those of your current firm, how long can you continue to represent these clients while the negotiations are pending? When must you notify your clients? When must you notify your firm?
- Once negotiations are nearing completion, in order to assess potential client conflict matters, how much information can you share with this firm about your current clients?
Lawyers change jobs every day and for many different reasons. As they try to find a better niche or nest, many times the next step is with the people they have worked with on a regular basis, who can include adversaries or others in the same field or regulators in their area of focus. These are the people who observe you regularly and have a close-up sense of what kind of lawyer you are. However, as you venture from one practice setting to another, ethics issues will invariably appear.
Being forewarned and forearmed about these issues can be extremely beneficial, so that you can exit your current firm with a minimum of bad feeling while at the same time present competent and professional responses to your potential employer’s questions while navigating the changes in interests and loyalty that can arise in a job search.
Two ABA formal ethics opinions and a recent amendment to Model Rule 1.6 Confidentiality of Information of the ABA Model Rules of Professional Conduct offer guidance in this area. State bar ethics committees have also chimed in.
For the period of initial approach and negotiation, ABA Formal Opinion 96-400 Job Negotiations with Adverse Firm or Party gives advice on how to handle the fact that your client is opposed by the firm you would like to work for.
Once negotiations get serious, it’s time to disclose enough information to the new firm to get a sense of how many and what kind of conflicts of interest will be created by your new affiliation. Model Rule 1.6(b) (7) and ABA Formal Opinion 09-455
Disclosure of Conflicts Information When Lawyers Move Between Law Firms explores just when and how much to reveal.
I. Negotiating with an adverse firm
The type of conflict that comes up when a lawyer moves from a firm to a new employer that represents clients with interests adverse to yours is a personal interest conflict under Rule 1.7(a) (2). This rule states:
(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:
(1) the representation of one client will be directly adverse to another client; or
(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer. (emphasis added)
While there is no direct adversity, there is the possibility of a material limitation on the representation of clients adverse to the new employer. Even simple inquiring or initial information-gathering about the adverse firm can loosen the ties of loyalty, because the lawyer is seeing the other side in a different capacity, as someone that he may be working for in the future. It’s just human nature, but lawyers in this type of situation will most likely want to make the best possible impression on the new firm. Whether that is by overlawyering or by pulling their punches in order to avoid antagonizing lawyers in the new firm, their current clients can be adversely affected. Furthermore, the job-seeking lawyer’s advice in terms of settling a case against the prospective employer’s client will receive extra scrutiny and his legal advice may be vulnerable to a claim of legal malpractice if the facts are extreme.
Notifying the clients and the firm
In Formal Opinion 96-400, the ABA Ethics Committee advises that at some point, you have to let both the client and the firm know what you are doing. That point comes when the job discussions are reasonably likely to interfere with the lawyer’s independent professional judgment on behalf of the client, his single-focus loyalty. In the words of the committee, this happens when, “the lawyer agrees to engage in substantive discussions of his experience, clients, or business potential, or the terms of a possible association.” The committee stated further:
“The Committee believes that there are two overriding factors affecting the 'likelihood that a conflict will eventuate' and 'materially interfere with the lawyer’s independent professional judgment in considering alternatives or foreclosing courses of action': the nature of the lawyer’s role in the representation of the client; and the extent to which the lawyer’s interest in the firm is concrete, and has been communicated and reciprocated.”
The first factor, the nature of the lawyer’s role in the representation of the client includes, “the posture of the case, the nature of the work that the lawyer could or should be doing, and the availability of others in the firm to assume the work that the lawyer is doing.” If the job-seeking lawyer does not have the principal relationship with or any direct contact with the client, then raising the potential conflict with the client may not be so important. In this case, if the lawyer is a subordinate he should raise the issue with his supervisor, who would then make the decision as to whether he should either be relieved of further involvement in the matter or continue with the representation. If the latter, the supervisory lawyer should seek consent from the client. The committee stated further that the subordinate lawyer could not continue to represent the client until he was informed that client consent had been obtained.
District of Columbia Opinion 367 (2014) stated that if the lawyer brings the job negotiations to the attention of his supervisor and follows the supervising lawyer’s directions he “will not be held professionally responsible even if it is subsequently determined that the supervisory lawyer’s determination of whether there was a personal interest conflict, and/or the recommended course of action, were incorrect under the Rules.”
The second factor, the extent to which the lawyer’s interest in the firm is concrete, and has been communicated and reciprocated involves the degree of seriousness of the job negotiations. Casually looking through the help wanted ads does not qualify as having a concrete interest in the firm. However, when the lawyer who has an “active and material” role in the representation of the client and is contemplating entering into serious negotiations with the opposing firm, he must obtain the client’s consent before doing so. If client consent is not forthcoming, the lawyer should do one of two things: either cease the job negotiations or withdraw from representing the client.
See also, The Restatement (Third) of the Law Governing Lawyers §125 cmt. d (2000), once discussion of employment has become concrete and the interest is mutual, the lawyer must promptly inform the affected client. The comment advises that in the absence of client consent the lawyer should either withdraw from the representation or halt the job negotiations; New York City Opinion 1991-1 (1991) holding “at a minimum, we believe that the disclosure obligations under DR 5-101(A) will arise in all circumstances no later than when an offer of conflicting employment has been extended to the lawyer and has not been promptly declined.” Pennsylvania and Philadelphia Bar Association Joint Formal Opinion 2007-300 (2007) opining that a departing lawyer should tell the firm when the possibility of leaving becomes an affirmative intention. If the new employment is with a firm that is interests adverse to any of the firm’s clients, the lawyer may also have a duty to tell the firm so that they can both comply with the rules on conflicts of interest.
District of Columbia Ethics Op. 367 was issued under the D.C. version of Rule 1.7 that incorporates an objective “reasonably may be adversely affected” standard that adds an element not set out in ABA Model Rule 1.7. The D.C. opinion differs with the ABA opinion regarding the timing of when a conflict is seen as attendant to the job negotiations. Thus the D.C. committee asked two questions: how is the prospect of a new job influencing the lawyer’s actions?; and asking from the objective perspective, how would a third-party outside the transaction evaluate the lawyer’s loyalty and dedication to only the client’s interests?
New York City Opinion 1991-1 (1991) noted several circumstances where the interests of a client and a lawyer’s personal interest in a job negotiation could collide. If the outcome of this particular client matter is keenly important to the prospective employer, one possibility would be for the lawyer to make decisions and act in a way likely to benefit the future employer. If the matter concerns a substantial amount of money that could greatly improve the situation of the prospective client, then the future employment would be rosier for the lawyer. Or, it could add measurably to the prestige or power of the opposing firm, making it all that more appealing as a prospective employer. This would give the lawyer a definite personal interest in the resolution of the current matter. The negotiating lawyer may also feel that her performance is being viewed as a part of the job application process and may alter her performance to one extent or another in light of a desire to leave a positive impression with the future employer, an interest that then detracts from a focus on the client’s outcome. The New York City committee emphasized that the opinion is not limited to matters in litigation.
In both the ABA and District of Columbia committee’s view, this conflict is a personal one and is not imputed to all other members of the firm. The New York City Bar also questioned the applicability of the imputed disqualification rule. In the ABA committee’s view, to the extent that other members of the firm also had an interest in the job negotiations, they would have to analyze the conflict under Rule 1.7.
II. Detection of conflicts of interest
A lawyer changing law firms is bringing with him a fiduciary duty of loyalty to the clients whom he represented at his former firm. If the interests of those clients conflict with the clients at the new firm, he is bringing in the potential for disqualification. Also, his clients may come with him, and he needs to determine if it will be a smooth fit or if the firm’s clients present conflicts to them. For the protection of all the affected clients and so that the lawyers involved can gauge the effect of the new hire on their current cases, disclosures need to be made. In August 2012, the ABA House of Delegates voted to approve an amendment to Model Rule 1.6 proposed by the ABA Ethics 20/20 Commission that specifically permits a lawyer to disclose confidential information in the context of a change in employment in order to detect conflicts of interest. This new provision states:
(b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary:
… (7) to detect and resolve conflicts of interest arising from the lawyer’s change of employment or from changes in the composition or ownership of a firm, but only if the revealed information would not compromise the attorney-client privilege or otherwise prejudice the client.
For further information on the background rationale for this amendment, see the Report and Resolution that the Ethics 20/20 Commission submitted to the House in August of 2012.
The amendment to Rule 1.6 essentially codifies ABA Formal Opinion 09-455 (2009) Disclosure of Conflicts Information When Lawyers Move Between Law Firms that addressed these issues. The key information is who are the clients and what are the issues. Typically this is confidential information. Under this opinion, the disclosure must be limited to that necessary to discover the potential conflicts of interest. Such disclosure must not prejudice any client, current or former, and they should only occur when the lawyer and the firm have entered into substantive negotiations about a new association. In addition, the receiving law firm may not use the disclosed information for any other purpose than detecting conflicts. The opinion stated:
There are matters, albeit rare, in which the identity of the client or the nature of the representation or both are protected by the attorney-client privilege. 22 There are also situations (e.g., clients planning a hostile takeover, contemplating a divorce or appearing before a grand jury) in which disclosure of nonprivileged information to the prospective new firm of the persons and issues involved would likely prejudice the client or former client….
In every case, a lawyer or law firm receiving conflicts information has a duty not to reveal that information. Use of conflicts information by the receiving lawyer or firm should be limited to the detection and resolution of conflicts of interest, and dissemination of conflicts information should be restricted to those persons assigned to or involved in the conflicts analysis with respect to a particular lawyer.
Of course, once conflicts are detected, and the lawyer decides to work for the new firm, the 2009 amendment to ABA Model Rule 1.10 Imputation of Conflicts of Interest: General Rule now permits screening for lateral hires so long as the procedures outlined in Rule 1.10(a)(2) are followed. The Ethics Committee’s Recommendations supporting the amendment are located here and here. Note, however, that state versions of Rule 1.10 can vary; check your local rules.
Changes in employment can raise many thorny ethics issues especially where the lawyer is contemplating working for a firm that represents clients with interests adverse to those of the job seeking lawyer. Depending on the circumstances, the job-seeking lawyer may need to disclose his job negotiations with any affected clients.
Once substantive employment discussions take place, the lawyer and the new firm may exchange information but only to the extent necessary to detect conflicts of interest.
For further information, check the rules, ethics opinions and case law of the applicable jurisdiction. Your state or local bar association may also be able to help.