Week 8 - Conflicting Representation in the Transactional Context

Class Notes

Maritrans

• Bad law: court elevated what really was economic adversity and material adversity after firm was fired

• Alleged scumbaggery, could Pepper Hamilton have done these? Yes, a firm can represent business competitors of a current or former client, but the lawyers in the firm must protect confidential information

• If the court don’t trust the lawyers or if the court doesn’t like the way it looks/appears, court is not going to allow

• Violation of the rules don’t necessarily create cause of action

• “Economically adverse” v. “directly adverse”

• If Pepper hamilton representation is materially adverse to it’s former client, then it is a hot potato

Maling v. Finnegan

• Economic adversity only

• Can’t disclose the other clients, but can condition the hiring the firm not representing other competitors within the space

• Zero-sum game means when one client gets, other client loses

Rule 1.7b - Waiver Basics

• Joint representations - disclosures and waivers,

• No favorites, love all equally or not at all, incl. new and longstanding clients

  • Subject to a Merrill Lynch/Zador waiver. Still love all equally until….

• Criminal reps? Ordinarily a lawyer should decline

• If a joint rep, then every time explain

  • Pros (less $, more efficiency) and cons (e.g., everything that follows);

  • Confidentiality;

  • Attorney-client privilege;

  • If a dispute or antagonism among clients, then (i) no take sides, (ii) withdraw, and (iii) supra (confidentiality, a/c privilege)

  • Confirm disclosure

Formation of Company/Entity

• Three groups: Idea Man/Woman, Moneybags, and Worker Bee

• Option 1: Tell everyone in writing, “I rep $bags and co.; if a conflict, then $bags only. I do not rep Idea Man/Woman or Worker bee… or anyone else

• Another option = entity in formation. In writing: “I rep co. to be formed only. I do not rep any of you… but you are responsible for paying my bill.”

  • Post-formation: company ratification of foregoing

• In ALL scenarios, as rep unfolds: (i) remember who/what is (not) your client; (ii) act and communicate/write like it; (iii) remind everyone in writing whom/what you do (not) represent

Challenge: Multiple/Parallel Reps

• Cure: intetntional Lawyering

• Family business:

  • Everything to everybody

  • Honest broker

  • Each new assignment, run conflicts. Decide: “Who is our client in this matter? Who is not?”

    • Engagement letter - client ID< scope, fee

    • “Im not your lawyer”

    • Guideposts 4, 6, 7, 8

Brennan

• Represented all the companies while everyone was getting along. Once trademark came out, litigation over which companies own the trademark. GC made decision to represent defendant

• Lawyers cannot pick and choose amongst constituents after dispute arises, only before

Steel v. General Motors Background

General Motors asked the court to remove the plaintiffs' law firm, Kimmel & Silverman, from a "lemon law" case because the firm had just hired Jay London, a former GM lawyer. The same request also covered 20 other lemon law cases the firm had pending against GM in New Jersey.

London's Work at McBreen (Finding 9) At McBreen, London worked on about 25 to 30 GM cases brought by Kimmel & Silverman, often dealing directly with Silverman. He sent GM case reports stamped "Attorney-Client Privilege" through GM's internal email system, using his own password.

GM's Confidential Guidelines (Finding 11) GM gave all its local counsel confidential "Guidelines for Handling Warranty and Lemon Law Litigation" and discussed them at the 1994 meeting. London does not remember reviewing them closely, but he does remember the document, and he also received GM's internal organizational details and sample evaluation letters.

London Resigns and Gets a Job Offer (Finding 12) London grew unhappy at McBreen, resigned on May 26, 1995, and over Memorial Day weekend called Silverman to ask for deadline extensions and mention his resignation. During that call, Silverman asked whether London wanted to join Kimmel & Silverman, which needed an experienced trial lawyer.

London's Ethics Research (Finding 13) London read Pennsylvania's ethics rules and was told by a Philadelphia Bar ethics committee lawyer that Pennsylvania allows "ethics screens" when lawyers switch sides. He concluded a proper screen would protect GM's secrets, but he did no research at all on New Jersey law.

Notice to GM (Finding 15) On June 2, 1995, London called Adams to say he had resigned and was thinking of joining Kimmel & Silverman, and he promised GM's interests would be protected. He then sent GM a written disclosure letter, and GM neither consented nor responded.

How Cases Were Divided (Finding 16) London started on June 7, 1995, and under the screen only Silverman (and an associate) would handle GM cases, while London and Kimmel would be kept away from them. Since joining, London has handled about one hundred lemon law cases against carmakers other than GM.

Physical Security Measures (Finding 17) GM files are kept in a locked "sub-office" reachable only through Silverman's office, are marked with blue tape, and require signing a log to remove. London's office is far from Silverman's, the computers are not networked, and staff screen his phone calls and mail so that nothing about GM reaches him.

Cracks in the Screen: Faxes and the July 11 Letter (Finding 18) The court found the screen did not always work smoothly, since no one had a plan for faxes when Silverman was away. Kimmel, who was supposed to stay off GM matters, signed a July 11, 1995 letter accepting a GM settlement offer while Silverman was on trial.

Silverman Changes His Story At first, Silverman testified that the letter should never have been written and broke firm policy. The next day, he said it broke only an "administrative policy" and not the screen itself.

The Judge Questions Silverman When the judge pressed him, Silverman said Kimmel had to send the letter to protect the client because the offer would otherwise lapse. He then answered "No" when asked whether it was wrong, while still agreeing it broke firm policy.

The Partners Disagree Silverman said it would not violate the screen if Kimmel had looked at the GM file, but Kimmel testified that it would. Kimmel had also signed several recent letters of representation on GM cases, which neither partner saw as a violation.

Shared Revenue (Finding 19) All firm income, including money from GM cases, goes into one general fund that pays every employee's salary. London is barred only from sharing in any GM proceeds beyond the usual fee.

Legal Standard

New Jersey Law Applies The court decided that New Jersey's ethics rules controlled under its local court rules. New Jersey's versions of Rules 1.9 and 1.10 then tracked the Model Rules, except that they did not allow screening.

The Court's Roadmap London clearly represented GM before, and GM never consented, so the court looked only at the three grounds GM raised. If any of them applied, the court would then decide whether the screen saved the rest of the firm.

Are the Cases "Substantially Related"? Kimmel & Silverman sent away every case London had personally worked on and argued the rest were different because each car's facts differ. GM agreed the facts vary by vehicle but stressed that the legal theories and defenses are nearly identical in every case.

New Jersey's Test GM relied on Reardon v. Marlayne, which asks whether the conflict between the old and new clients creates a setting in which secrets could be revealed. Under that test, the cases need not share the same facts, and disqualification is required when the issues are practically the same or the link is "patently clear".

The "Appearance of Impropriety" Rule In New Jersey, a lawyer can be disqualified even without an actual conflict if an informed citizen would see the representation as improper. The doctrine aims to boost public trust in lawyers, and New Jersey still values it even though other states such as Pennsylvania do not.

Other States' Doubts About Screens Whether screens are allowed depends on each state's policy, and New Jersey insists on strict conflict rules. Many state courts have found screens ineffective because temptation is constant, monitoring is hard, and violations are almost impossible to prove.

Weighing the Client's Choice of Lawyer As a last step, the court weighed high professional standards against a client's right to pick a lawyer. The plaintiffs submitted statements that they were happy with the firm and argued GM was using its corporate power against ordinary buyers.

Legal Arguments

GM's Three Arguments GM had to prove disqualification was needed and argued that London's conflict should spread to the whole firm. It claimed that (1) the cases were "substantially related" to his GM work, (2) he had nonpublic GM information that could hurt GM, and (3) the hiring created an "appearance of impropriety".

Court’s Reasoning

The Court Finds a Substantial Relationship The legal issues in London's old GM cases and the firm's current ones are virtually identical, and the range of car defects is limited and repeats. Although the court did not think London would leak secrets on purpose, the setup itself made disclosure possible, so actual disclosure did not need to be shown.

London's Access to Confidential Information As GM's trusted lawyer, London learned GM's strategies, settlement approaches, and bargaining positions, and he even had GM email access. Whether or not he read the guidelines, his access alone was enough for the court to assume he learned GM's secrets.

The Presumption Cannot Be Rebutted When cases are substantially related, the court assumes that secrets were shared, no matter what the lawyer says. Representing the plaintiffs well would force London to use that information against GM.

"Generally Known" Is Not Enough The firm argued that lemon law know-how is widely available in books, databases, and bar programs. The court said public how-to guides do not make GM's own decision-making, personalities, negotiating style, and claims procedures "generally known".

Silverman's Experience Does Not Help Silverman argued he already understood GM's settlement approach from handling hundreds of GM cases. The court found that his belief did not show GM's information was public, so London was disqualified under Rule 1.9(a)(2).

Why It Looks Improper Here London spent five years and over fifty cases deep inside GM's legal team, which trusted him "implicitly". He now works at a small firm that sues GM, and part of his salary likely comes from cases against his former client.

Finding of Appearance of Impropriety Even if London never works on GM cases, the public would strongly suspect that he carries GM's secrets. The court stressed that it was protecting public trust in the profession, not punishing London personally.

Weighing the Client's Choice of Lawyer As a last step, the court weighed high professional standards against a client's right to pick a lawyer. The plaintiffs submitted statements that they were happy with the firm and argued GM was using its corporate power against ordinary buyers.

The Firm Grew Too Fast to Check the Rules The court acknowledged the firm's skill and its great success in Pennsylvania lemon law cases. But with rapid growth and long workdays, the lawyers apparently never stopped to consider other states' ethics rules.

Other Lawyers Can Do This Work The firm itself said lemon law cases are simple and take only six to twelve months, so other New Jersey firms can protect the plaintiffs. This was not an "extraordinary case," and harm to the public outweighs the plaintiffs' inconvenience.

GM Was Not Playing Games The court knows disqualification motions are sometimes filed just to delay a case or take away a party's lawyer. But GM moved quickly, filing on July 3, 1995, soon after the hire, and there was no evidence it was stalling or harassing.

O'Donnell v. Robert Half Background

O'Donnell v. Robert Half, Background In this wage case under the Fair Labor Standards Act, the plaintiffs were represented by the Lichten firm and the defendants by Seyfarth Shaw. The dispute concerned Sarah Getchell, a Seyfarth associate who was laid off in May 2009 and then hired by the Lichten firm.

The Conflict Dispute Begins Seyfarth warned that Getchell's work on this very case created "serious conflicts" requiring the Lichten firm's removal. The Lichten firm said there was no conflict and that Getchell would have nothing to do with the case.

Wall Ordered and Secret Evidence Judge Gorton ordered the Lichten firm to wall Getchell off completely from the case. The court also refused to let the plaintiffs' lawyers see the confidential materials the defendants submitted privately in support of the motion.

No Substantial Involvement Getchell did receive material protected information, so the first exception did not apply. But she spent only 7.2 hours researching one issue and writing a short memo, so her involvement was not "substantial".

The Court's Evidence Problem The evidence was filed in secret, and Getchell testified she had no memory of working on the case or learning about it. The court believed her, since new associates juggle many assignments, but it still had to rely on the defendants' secret filings without cross-examination.

The Practice Group Meeting In November 2008, Getchell attended a group meeting where the defense's future strategy in this case was discussed. The court inferred she heard defense lawyers' strategy and thinking (work product) rather than secrets from the client itself.

The Article Project Getchell also helped a defense lawyer write an article on treble damages in Massachusetts. Again, she seemed to learn the lawyers' work product rather than client secrets.

Legal Standard

The Massachusetts Rule Everyone agreed Getchell herself was barred, so the question was whether the whole firm was too, under Massachusetts Rule 1.10(d). That rule allows screening only if the lawyer has no material protected information, or if she had neither "substantial involvement" nor "substantial material information" and is screened and receives no fee from the case.

The Harder Question: Substantial Material Information The close question was whether the material information she received rose to the level of "substantial". Quoting Judge Keeton, the court said this requires a judgment call that weighs many factors, not a bright-line rule.

Legal Reasoning

The Result: Information Was Substantial In her research project, she learned a relevant client fact and the defense's legal strategy on that issue. Looking at everything together, the court called it a close call but held the information was "substantial".


The Rule Is Strict, and Firms Rely on It The court admitted the rule is strict, since it leaves only one choice: disqualify the firm or not. Firms share information with associates trusting that the rule will stop a former colleague from joining the other side.

Why the Rule Exists Massachusetts courts say related cases expose a lawyer to an "intolerably strong temptation" to break a former client's confidence. The former client need not prove the information was misused, only that the tempting situation exists.

The Lichten Firm Took a Big Risk The Lichten firm hired Getchell knowing Seyfarth's position and was on notice that it could be challenged. The court granted the motion to disqualify the plaintiffs' lawyers.