The judge glances at you as he announces his ruling granting your opponent's motion to disqualify your law firm. You think back to the day, one year earlier, when the case came in the door. It was a cold Tuesday morning. The phone rang at 7:30 a.m. You remember it well, because you hadn't even had a chance to take your first sip of coffee.
"This is Sally Jones, President of Widgets-R-Us. You've come highly recommended for your products liability experience. Widgets has been sued in a large matter in Superior Court. Can you help?"
Even without caffeine, you remembered to caution Ms. Jones not to reveal any confidential information and to provide you with the names of all parties who foreseeably might be involved in the case. After running the names through your firm's conflicts database, you received the all-clear. You diligently filed a record of the conflicts check and the steps you took. For the past year, you have worked hard on the case, putting it in good position for a satisfactory result for Widgets.
So how did you end up getting disqualified?
Ten months into the litigation, a representative of your co-defendant, the manufacturer of the allegedly defective product, testified at a deposition that a component was made by Sprockets, Inc., a small company in a remote part of the state. Plaintiff amended the complaint to add Sprockets as a defendant, and, without doing a new conflicts check, you filed a cross-claim. As it turned out, unknown to you, one of your firm colleagues has been giving Sprockets advice about its employment contracts.
Even though the matters are entirely unrelated, Sprockets sought to disqualify you and your firm, on the ground that you had an imputed concurrent client conflict of interest under ER 1.7 and ER 1.10. The judge agreed.
Too often, attorneys view conflicts clearance solely as a new-matter intake issue. Once conflicts clear, lawyers may forget to analyze subsequent developments that may create midstream conflicts of interest.
The most common midstream conflicts arise from the addition of new parties, like Sprockets. Litigators should complete a supplemental conflicts check whenever a new party is added to a case, even if it is unclear or unknown whether the new party will be adverse. Transactional lawyers should remember to re-run conflicts any time a new party is added to a deal, for example if a new lender emerges or additional investors are added.
Even non-parties who surface during a matter can create conflicts. For example, a lawyer often may not, on behalf of one client, subpoena or take adverse third-party discovery from another firm client without a waiver. The ABA Standing Committee has found that seeking such discovery ordinarily rises to the level of "direct adversity" under the conflict rules.1 If detected before the discovery is sought, such conflicts can potentially be addressed by obtaining waivers or hiring conflicts counsel to take the discovery.2 But failure to perform a timely conflicts check may foreclose these options. Similarly, a new conflicts check should be performed if an insurance company for a party is identified after initial intake of a matter. While this may not present a conflict, the question can only be analyzed meaningfully and properly if a timely check is performed.
Parties changing character
A friendly party may become adverse as a matter progresses. In the meantime, one of your firm colleagues may have relied on the designation of the party as non-adverse in your conflicts database to take that party on as a client. Mergers and names changes also can thrust conflicts that were not apparent at the outset of a representation upon lawyers.
Finally, even if conflicts are clear, significant changes to a case's complexity sometimes cause lawyers to consider amending their fee arrangements with clients. Remember that if a fee dispute arises, mid-representation fee agreement changes will be heavily scrutinized and may be treated as a "business transaction with a client" under ER 1.8(a), requiring enhanced disclosures and advice that the client consider consultation with independent counsel.3
1. ABA Formal Op. 92-367 (Oct. 16, 1992).
2. See N.Y. City Bar Assoc. Op. 2017-6.
3. See In re Curry, 16 So.3d 1139 (La. 2009).
Originally Published by Arizona Attorney - September 2021.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.