Conflicts in large law firms.

The title of this post is extremely boring. No getting around that fact. The topic though is not boring at all. Managing conflict issues in large law firms can be described in a number of different ways, but the adjective “boring” never fits the bill.

The topic is front of mind for me this week – in addition to all of the normal reasons — because of two recent developments arising in vastly different settings. One is an ethics opinion issued out of Ohio addressing the inability of a firm to cure a variety of conflict in the transactional world through the use of nonconsensual screening. The other is an appellate court decision in my state reversing a defense ruling involving evaluating of an advance waiver.

The ethics opinion undoubtedly gets the answer wrong. The appellate decision … I’m not so sure.

Let’s go with the problematic ethics opinion first.

Earlier this month the Ohio Board of Professional Conduct issued Opinion 2020-10, which addressed the following question:

Whether lawyers in a law firm may represent two directly adverse clients in the same transaction by screening separately assigned groups of firm lawyers and with the informed, written consent of the affected clients.

For the record, the answer should be “yes.” The answer should be yes even before you learn that the two clients in question are each sophisticated entities, with long-term relationships with the firm, and that each has their own in-house counsel. Yet, the Ohio Board cannot manage to get to “yes.” Instead, the Ohio opinion essentially exalts the existence of imputation principles for conflicts of interest in a firm to a higher level of importance than client autonomy. I will not offer a very extended analysis of the ways that the opinion goes wrong – in part, because the Ohio opinion doesn’t really offer much of an extended analysis either.

Essentially, the Ohio opinion wants to be capable of being read as being based on the conclusion that the arrangement is not consentable because the lawyers could not competently handle the representations adequately, but it really is more of an exercise of trying to pretend something is such a square peg that it can’t be made to fit into a round hole.

Where the opinion goes wrong the furthest is by taking rules that address the use of nonconsensual screens (RPC 1.10) to cure conflicts and acting like the fact that the rule does not address consensual screens means that consensual screens cannot be used to avoid imputation or as a condition of obtaining client consent. To call that highly flawed logic is probably being too nice.

While it is easy for me to shrug off the Ohio opinion since I do not practice in Ohio, a more recent appellate opinion from the Tennessee Court of Appeals is not something that can just be shrugged off. Thus, the struggle of whether it has offered the correct conclusion on the conflict issues hits much closer to home.

On October 16, 2020, the Tennessee Court of Appeals issued an opinion reversing a grant of judgment on the pleadings in a legal malpractice case against the largest law firm in Tennessee. The claims of legal malpractice stem from allegations of a conflict of interest. Interestingly, it involves litigation where not only is the plaintiff proceeding pro se but so is the defendant as the opinion indicates the defense side representation was handled by in-house lawyers for the law firm. You can read the full opinion in Culpepper v. Baker Donelson here.

The decision was overturned on two grounds. One involved the commencement of the statute of limitations not fit for today’s discussion. The other ground involved a conclusion that the trial court was wrong when it decided that the conflict waiver that the client in question signed was not enforceable.

I’ll turn it over to Bill Freivogel who offers a very to-the-point summation of the decision for you over at his site:

Joint Representation; Advance Waiver (posted October 19, 2020) Culpepper v. Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., No E2019-01932-COA-R3-CV (Tenn. App. Oct. 16, 2020). Plaintiff is suing Law Firm for malpractice, arising out of Law Firm’s representing Plaintiff and Plaintiff’s former employer in an SEC investigation. The trial court granted Law Firm a judgment on the pleadings. Plaintiff claimed Law Firm had a conflict of interest. The trial court ruled that Plaintiff had waived any conflict by signing Law Firm’s “engagement, waiver and consent letter.” In this opinion the appellate court reversed and remanded the case to the trial court. [Our note: Law Firm’s waiver letter was carefully drafted for a joint representation of an employer and employee. It covers the usual subjects of sharing confidences (or not), withdrawal from one client and continuing with the other, and so forth. The issue, as we see it, is whether, given the facts of this case (including Law Firm’s conduct) the letter could have adequately protected the employee. Too early to tell.]

To give just a little more helpful background, Bill isn’t kidding when he says that the language of the client waiver covers all of the ground you might expect. The portion of the engagement letter addressing the joint representation of Culpepper, his company, and two other individuals spans six paragraphs. Here are some excerpts:

In a situation where our firm represents multiple clients jointly in the same matter, we are free to share confidential information
communicated to us by one client with the other joint clients in the course of and in furtherance of the joint representation. We would expect to share information we receive from you with the Company, but we will not necessarily share with you information that we receive from other clients, and you will not be entitled to obtain any confidential information provided to us by any other joint client either during the joint representation or thereafter. Please contact me immediately if you have any objections or concerns regarding this approach.

[snip]

If a conflict should arise between you and the Company, we will be
required to withdraw from representing you, and you may need to engage another attorney to represent you. You agree that, should this occur, we would be free to continue to represent the Company and other joint clients (except in litigation directly adverse to you in this or a substantially related matter) and that we and they may use any information we have obtained during our representation of you, including any confidential information you may provide to us.

[snip]

You should be aware that joint representation of multiple clients
may result in significant benefits for each client, but it may also result in
certain risks that might not arise if each client had his or its own separate counsel. . . . In addition, the Company has decided as a condition of this joint representation, that confidential or privileged information disclosed to Baker Donelson by individual clients will be shared with the Company and that confidential or privileged information of the Company will not necessarily be shared with individual clients, including yourself. The Company may disclose, or direct us to disclose, to the SEC, or other federal or state regulatory agencies or other third parties confidential or privileged information provided by you and could decide to use such information in a manner that could be disadvantageous to you.

So, in the end, the plaintiff’s argument is fundamentally that the situation was one in which he could never have voluntarily and knowingly waived the conflict under any circumstances. That argument is made despite the fact that the conclusion of the engagement letter, preceding his signature read as follows:

I have carefully read the foregoing letter, considered all information
necessary and useful in determining whether or not to consent to the
representations outlined above. I have been encouraged to consult with
independent counsel regarding this consent to representation, and I am fully aware of my legal rights in this regard. Upon reasoned reflection, I hereby voluntarily consent to the representations by Baker Donelson as outlined above.

As an outsider to the proceedings, I could potentially be convinced that somehow the very nature of the matter involved – the SEC investigation – could have been so fraught with peril that it was not the kind of particular conflict that the firm could ever be able to handle for all involved competently and diligently. But the opinion that has been issued – albeit only resolving things at a judgment on the pleadings stage – certainly isn’t convincing on that front.

What is most disappointing about the opinion though is that, despite the portions of RPC 1.7 and accompanying Comment that are discussed, the Court does not address at all the language in our Comment that specifically addresses the waiver of conflicts in advance, Comment [22].

It would have been helpful for the Court to at least attempt to offer thoughts of its analysis through the lens of this Comment because it would have helped many lawyers and firms attempt to glean some guidance about whether there was something about the disclosures that was not sufficiently specific and detailed or if the problem truly amounts to nothing more than an application of the final sentence of that comment:

In any case, advance consent cannot be effective if the circumstances that materialize in the future are such as would make the conflict nonconsentable under paragraph (b).

The ABA comes through with another quality ethics opinion.

So, nearly everything is awful these days. Finding something interesting enough to avoid highlighting the awfulness around us is not altogether easy. This is pretty much too traumatic and damning to write about. Dwelling on this would just be petty at this point.

Coming through as a light at the end of the tunnel today is ABA Formal Ethics Opinion 494 released by the ABA Standing Committee on Ethics and Professional Responsibility addressing a decent topic.

The topic – what are an attorney’s obligations that can arise from personal relationships with opposing counsel? Patterned a bit, as it explicitly acknowledges, on a recent Formal Ethics Opinion regarding judicial personal relationships with lawyers (Formal Opinion 488), Formal Opinion 494 hits all of the correct notes for dealing with this issue.

Most importantly, it appropriately centers the analysis where it fits in the Model Rules: it is an issue involving RPC 1.7(a)(2) – material limitation conflicts arising from a lawyer’s own personal interests. The opinion stresses that ordinarily such conflicts are not imputed to others at the firm. And it lays out reasonable categories to help guide lawyers in their thinking about these issues.

It also makes the point that while, most of the time, the obligation on the lawyer is disclosure to the client and moving forward only if the client is willing to waive the conflict, there can be situations where the conflict is, itself, not waivable.

The opinion posits a relationship between two lawyers that is so close that the lawyer could never get comfortable filing a well-founded motion for sanctions against the other lawyer on behalf of a client as an example of a situation where the conflict may not even be waivable.

And that entire genre of thought has, over the years, been very helpful to me in talking lawyers through situations, both in their real practice, and just as an educational tool at seminars. I, like many other ethics CLE speakers, have used lots of hypotheticals to tease out ethics issues and one that has always been fun to discuss involves something like this scenario:

You are at lunch with opposing counsel on an appellate matter who is a close friend and former colleague. Unprompted, he says, “I bet you can’t wait to see what I’ve got in store for you in my response brief. Well, you’ll have to wait a bit because I’m going to take every day allowed for me before filing so you won’t get your hands on it until a week from tomorrow.” You know, because you just checked it before coming here, that his deadline for his brief is actually tomorrow. What do you say?

This scenario usually prompts a good discussion and there is always someone in the crowd willing to say that they would tell their friend to, at least, go back and double check their math on the deadline. The problem, of course, is that doing that without first talking to your client to get approval would be extremely ethically dicey. The easiest way to drive that point home to lawyers is to ask them if, since the personal relationship with opposing counsel is so important to them, they secured informed consent from their client at the outset with respect to how the lawyer’s personal interest in their close friendship with opposing counsel could materially limit the representation.

Formal Opinion 494 is a well-done explanation of this same concept as well as something that offers a more formal set of guiding principles for determining whether disclosure to a client may be required. The full opinion is worth a read.

Is it perfect? No. It is infuriating in one respect. It is dated July 29, 2020 but was only released today, October 7, 2020.

We are all struggling with linear time these days. The last thing we need is the ABA trying to gaslight us about what month it is. Plus, if they are going to do that, you might as well go full bore and date Formal Opinion 494 as having been issued on the 221st day of March 2020.

Ethics opinion about a business conflict goes wrong.

It is very tempting to stay on the topic of bar examinations today, given recent absurdist developments. Arkansas has declared it simply has to have its in-person bar exam in July 2020 because things are likely to get worse as the year goes on. Oklahoma has attempted to reassure everyone about the safety of their in-person planned exam in a message that simultaneously demands that all test takers self-quarantine for 14 days before the exam. Virginia, trying to take the cake apparently, is insisting on a courtroom attire dress code for their in-person exam but is doing away with having to wear a tie as a concession to COVID-19. It is tempting, but it’s all too frustrating, so…

Instead, let’s go back to some of our roots and discuss a recent ethics opinion. It comes out of Ohio and it addresses a conflict issue, but is noteworthy for at least two reasons: (1) it addresses a conflict of interest issue involving representation of a government entity and (2) it sort of addresses something that is more a business conflict issue rather than a true ethical conflict. If you’d rather just read the opinion, you can access it here.

Ohio Board of Professional Conduct Adv. Op. 2020-04 weighs in on whether a firm has a problem representing a group of landowners who are opposing a zoning variance sought by an agency seeking to establish a shelter for domestic violence victims. The agency is not a client of the firm in other matters, but the firm does represent a community mental health board that contracts with the agency. The firm has a one-year contract to perform legal services on an “as needed” basis to the board but has not been asked to do any work related to the zoning variance matter. The firm does know though that the board supports the agency’s effort to obtain the variance and wants the agency to succeed.

Now, most lawyers would hear that scenario and see a likely “business” conflict but no ethical conflict. By business conflict, I simply mean that the firm might not have wanted to take on the landowners because it might displease the institutional client – which might be a better source of ongoing and continued business to the firm.

The Ohio opinion, however, finds a way to treat the situation as an ethical conflict but, at its heart, it does so only by turning the business conflict into a material limitation conflict using the idea of “personal interest” of the lawyer as something that could be expanded to be the firm’s “personal” financial interests.

I am far from convinced that such an analysis actually works.

The opinion spends only a paragraph explaining something that should be obvious – this is not a representation involving direct adversity between firm clients. After that, the opinion lays out its argument for the existence of a “material limitation” problem for the firm. The opinion begins on the right foot by explaining how there does not appear at first to be any conflict because “the law firm’s provision of legal services to the board and its representation of the landowners are wholly separate and unrelated.” The opinion though pivots to a required “closer examination” leading it to the idea that “it would be reasonable to conclude that the board’s overall interest in supporting the agency’s zoning variance may compromise the firm’s
representation of the landowners opposing the variance.”

Delving into more explanation, the opinion speculates that the firm might be limited in pursuing legal alternatives for the landowners because of the overall interests of the other firm client. All of that is well and good, as it is true that sometimes material limitation conflicts require some digging to understand, but the opinion then moves fully into rhetoric that sounds as an analysis of a business conflict.

Specifically, the opinion points to the firm’s “inherent financial interest in maintaining its standing client-lawyer relationship with the board” as one of the factors leading to a conclusion that there is a material limitation conflict requiring waivers from both the landowners and the board in order for the firm to continue both representations.

The opinion further undercuts any claim to be purely addressing an ethical conflict question by explaining that, if the clients won’t provide consent, then the firm only has to withdraw from one of the two engagements. That remedy is most assuredly the stuff of business conflicts. Traditionally, a firm that needs to extract itself from conflicting representations that run afoul of the ethics rules cannot simply drop one of the two clients like a “hot potato,” but have to withdraw from both client representations. There are exceptions, but none of those exceptions are identified in this opinion.

The opinion also suffers from at least one more flaw. Even under its own premise, it does not follow that both the board and the landowners would need to provide consent. The only representation that the opinion discusses as being potentially harmed by the conflict is the representation of the landowners. Thus, the landowners can be said to be the only clients “affected” by the material limitation conflict. Notably, the opinion never actually quotes the language of the rule it is purporting to apply and never reminds the reader that RPC 1.7(b) only requires informed consent from “each affected client.” Thus, as long as the landowners in the zoning variance proceeding were willing to provide informed consent to the firm’s representation despite the fact that the firm’s relationship with the board could limit available options and approaches, then the rule would still be satisfied.

Two more ethics opinions explore restrictions on lawyers’ ability to enter (or even offer) certain contracts.

First, this is not being titled as a “Friday Follow Up” post because, like the rest of you, I have no idea what day of the week it is at this point.

Second, there is way much more important events afoot in the world and if you want to know my thoughts about those you can go find me on Twitter. Given the complete lack of even a fig leaf to connect to legal ethics on that front, I’m sticking to sports here.

Third, two ethics opinions from two different states came out late last year addressing two different variations on ways that the ethics rules makes lawyers “special” when it comes to the right to contract. Because states like mine have been engaged in the issuance of ethics opinions really pushing the boundaries of this concept (at least as to the scope of RPC 5.6), it seems worth mentioning these two opinions albeit each for slightly different reasons.

The first of the two is almost entirely straightforward in addressing something that I certainly think is undoubtedly clear from the Comment to the ABA Model Rule — whether the scope of RPC 5.6 is somehow different for in-house counsel. Nevada, in Formal Op. 56, has made plain that the scope is not different, explaining that an in-house counsel cannot accept a stock award agreement that is made contingent upon agreeing to a one-year covenant not to compete. It somewhat helps to understand why Nevada would have to issue an ethics opinion on this question to know that Nevada has no Comments adopted along with its rules. Instead, Nevada’s Supreme Court has offered that both the preamble and the comments to the ABA Model Rules are something that “may be consulted for guidance in interpreting and applying the Nevada Rules of Professional Conduct.”

Here in Tennessee, we actually have our own Comment identical to the ABA Model Rule version so an ethics opinion wouldn’t really be necessary to cover the fact that the Comment specifically says it applies to organizational employers as well as private firms. One nuance that the opinion introduces but does not explore in any real depth is that an in-house counsel could agree to a non-compete that would only apply to the performance of business functions, rather than legal services, at a competitor. Thus, an in-house lawyer serving as both General Counsel and Executive Vice President at one corporate employer could be required to agree as part of a stock bonus not to take any similar employment with a competing company in the future by focusing only on the executive portion of the existing job.

The Nevada opinion also delves a bit into a way that a confidentiality agreement as part of such a stock award could also run afoul of RPC 5.6 by extending beyond the requirements of RPC 1.6 and RPC 1.9 under the ethics rules.

The other opinion I wanted to touch on comes from Los Angeles. LA County Bar Op. 532 tackles a question that does not require application of RPC 5.6 to resolve but that is not entirely unrelated to that rule — whether a lawyer can agree to indemnify the adverse party as a condition of a settlement. The LA County opinion correctly reaches the conclusion that the lawyer cannot do so because of the conflict that creates between the personal interests of the attorney and the client’s interests. It is an uncontroversial conclusion as the opinion admits because there are some 20+ other jurisdictions, including here in Tennessee, that have likewise made such a settlement provision improper.

Two other aspects of the opinion are much more interesting, however. One is that the primary ground on which the opinion nixes the possibility is that doing so would be the lawyer improperly paying the client’s business or personal expenses in violation of California’s RPC 1.8(b)(5). The other is that the opinion also involves RPC 8.4(a) to create the same dynamic that is in play when RPC 5.6 is triggered – it is unethical for a lawyer to propose such an agreement to the plaintiff’s lawyer because it would be unethical for the plaintiff’s lawyer to agree to it. While RPC 5.6 states plainly that it is an unethical for a lawyer to “participate in offering or making” the kind of agreement addressed by Nevada as discussed above, the potential reach of RPC 8.4(a) when it comes to negotiating contracts is often overlooked. California’s rule, like the ABA Model, makes it a disciplinary violation for a lawyer to “knowingly … induce another” lawyer to violate the ethics rules.

For attorney’s eyes only.

Okay. It helps to get into my mindset while writing this if you hear the title in the voice of the musical snippet “For British Eyes Only” from Arrested Development. If you can’t make the frame of reference, then so be it. We’ll have to work to find common ground all the same. (Actually, for the briefest of moments I forgot that we live in 2019 when everything is but a link away, so here is what you want the title of the post to sound like: clip.)

Ethics opinions are interesting creatures. They provide a group (usually) of people with law degrees with an opportunity to elaborate on otherwise potentially unsettled (or even unsettling) questions of application of the ethics rules. As a result, they can be used to set a trend in one direction or another toward either expanding or limiting the scope of a rule.

Usually, they are most influential when they involve an interpretation of the standard version of a particular ethics rule. In Tennessee, as I’ve written about a few times now, formal ethics opinions are being used (for better or worse) to severely expand the scope of what RPC 5.6 means in terms of when an agreement entered into in connection with the settlement of client’s matter will be deemed to involve an improper restriction on the attorney’s right to practice. Those opinions are potentially of particular moment because they are interpreting language that is pretty widespread in its uniformity: “A lawyer shall not participate in offering or making … (b) an agreement in which a restriction on the lawyer’s right to practice is part of the settlement of a client controversy.” Over the course of a few opinions now, the Tennessee Board of Professional Responsibility has added layer upon layer of kinds of provisions that could be in a settlement agreement for a number of potentially legitimate reasons but that are being ruled out because they are being treated as an improper restriction under RPC 5.6.

A recent ethics opinion in Ohio addressing another variation of same seems to be rowing in the same direction as it concluded that a plaintiff’s lawyer could not be asked to commit to the fact that they did not actually have any other clients at the moment of settlement with similar claims against the settling defendant. You can read that one here.

So, I was briefly intrigued when I saw a tweet about a proposed ethics opinion in North Carolina that was concluding that a lawyer could ethically agree to an “attorney’s eyes only” restriction on the production of certain documents in a case without first getting their client’s consent to such an arrangement. That seemed like a very difficult position to justify and it seemed like it was something of a polar opposite of what is going on in the thread of Tennessee ethics opinions about RPC 5.6. The 5.6 series of opinions is almost going out of its way to find conflicts between an attorney’s interest and their client’s interest in order to shoehorn the situations into RPC 5.6. Yet, here was a nearby state proclaiming that something that seemed squarely like a real conflict for the lawyer would be kosher even in the absence of seeking client consent.

(Admittedly, my initial reaction also was to be skeptical about the conclusion. I’ve certainly encountered my fair share of AEO provisions in protective orders but I’ve never signed off on one without running it by the client so that they can decide in advance if they are going to have a problem with the arrangement. Seems like a pretty clear creation of a conflict of real importance to the attorney-client relationship where the client should be signing off on accepting such a situation before it transpires.)

But, in reading the proposed opinion, which you can access here,what I learned is that it leans heavily upon non-standard language in North Carolina’s rules that provides strong justification for the conclusion. Specifically, it relies upon the fact that North Carolina has divided its RPC 1.2 into a number of subparts, including an (a)(3) that gives the lawyer the ability to “exercise his or her professional judgment to waive or fail to assert a right or position of the client.”

On its face, the existence of such a rule could provide grounds to think this is a correct conclusion, but, if you really think about it, that provision if it is without limit is … I believe the technical, legal term would be BANANAS!

Surely, it was never intended to impact things that are vital to the representation and for which the client should have final say. Right? I mean, on its face, it would allow a lawyer to exercise professional judgment to waive the client in a criminal case’s right to choose not to testify.

To the extent the comments provide us with any insight about what was intended it seems pretty important to note that paragraph [1] of the Comment provides only one elaboration on the concept: “For example, a lawyer may consent to an extension of time for the opposing party to file pleadings or discovery without obtaining the client’s consent.” That is both an innocuous example of the use of the rule and one that seems pretty redundant for RPC 1.2(a)(3) given that North Carolina’s RPC 1.2(a)(2) also addresses that kind of situation by saying: “A lawyer does not violate this rule by acceding to reasonable requests of opposing counsel that do not prejudice the rights of a client, by being punctual in fulfilling all professional commitments, by avoiding offensive tactics, or by treating with courtesy and consideration all persons involved in the legal process.”

Why can’t we (both) be friends (of the Court)?

So within the last few days the New York State Bar Association has issued an interesting new ethics opinion addressing a variation of an issue that is straightforward nearly everywhere.

Lawyers tend to know that conflicts questions can often be complicated but that there is at least one that is pretty straightforward: different lawyers in the same law firm cannot represent different clients who are on opposite sides of the “v” in the same lawsuit.

Can’t do it; can’t ask a client for consent; just a non-starter. (In Texas, your mileage may vary. But, otherwise pretty universal across the nation.)  NYSBA Ethics Op. 1174 evaluates a somewhat esoteric question that revolves around whether participation in litigation as counsel for an amicus curiae works the same way. Namely, whether amici on opposite sides of the same litigation matter can be represented by lawyers in the same firm.

I think that the NYSBA has gotten the answer on this correct though I’m not as certain about whether the escape valve they offered the inquiring firm is entirely correct. To get to bottom of both of those points, it strikes me as easiest to first analyze something that the NYSBA did not discuss because it should ease folks into the correct answer (if you aren’t there already).

If you were representing the plaintiff in a case, could another lawyer in your firm take on the representation of an amicus curiae seeking to persuade the Court to rule in favor of the defendant’s position in that case?  I think we’d all agree that the answer to that would be “no.” Maybe we’d argue over whether that was because that second matter would be “directly adverse” to the plaintiff client or whether it would just be a “material limitation” conflict. (FWIW, seems pretty directly adverse to my eyes.)

So, concluding that two different amici on opposite sides of the same litigation matter is a conflict seems like an entirely appropriate conclusion. It also seems fair to conclude, given the traditional language used in rules like Model Rule 1.7 (as does New York’s RPC 1.7(b)(3)) that it amounts to representing clients on both sides of the same litigation and, therefore, cannot be undertaken even with client consent. Those were the conclusions reached in Opinion 1174.

Because of the nature of the scenario that was presented to it, the NYSBA went a bit further to put together something of a “but you could do this” sweetener. The inquiring firm had surveyed its associates about interest in taking on an amicus matter on a pro bono basis and gotten mixed feedback because there were some folks who believed in the correctness of the opposite sides of the issue. The NYSBA indicated that lawyers in the same firm could appear for amici on opposite sides — if the lawyers were not representing a client but were acting pro se.

While that presents a potentially messy practical question for the firm, it seems like the correct result under the ethics rules if each side’s involvement is pro se. What is not clear to me is whether the NYSBA is intended to also address whether a firm lawyer could file a pro se amicus brief to take the adverse position to another amicus who is actually a client being represented by the law firm.

Certainly seems to me like some kind of additional conflict analysis would be required to evaluate that question because of the potential that the personal interest of one more lawyers that the firm could create a significant risk of materially limiting the firm’s ability to represent its client.
The opinion also does not address a much harder issue to both evaluate and to even “catch” in the first place … representing amici in different litigation matters who are on opposite sides of the same issue and advocating for outcomes that are markedly different on the same legal issue.

If a firm is fortunate enough to have built a conflicts system that would allow them to catch it, or if they otherwise figure it out ahead of time, that issue is one that should be run through the ringer as a “positional” or “issue” conflict and likely will turn on the relationship of the courts involved and whether one of the courts would be binding on the other when it decided the issue. At the very least, unlike the “same litigation” matter scenarios, that kind of conflict might be subject to waiver by the affected clients.

Two For Tuesday For Tennessee

From time to time I feel a real obligation to write about things that are primarily (if not exclusively) only of interest to Tennessee lawyers. Today is one of those days so apologies in advance if this is not your cup of tea. (On the upside for you, this will be relatively short so you might be able to justify still reading it.)

There have been two significant developments this week in Tennessee involving rule changes (not ethics rule changes) but rule changes important to the practice of law in Tennessee. One is the adoption of a new Tennessee Supreme Court Rule authorizing collaborative law family law practice. The other is a further structural and substantive set of changes to the rule that governs the admission of lawyers in Tennessee – Tenn. Sup. Ct. R. 7.

The revisions to Rule 7 address a number of non-substantive changes including architectural reworking of the structure and ordering of portions of the rule but also address some substantive issues as well. You can read the entirety of the order implementing the revisions (which includes both a clean and a red-lined copy of the revised Rule 7) here.

Perhaps the most important substantive change to Rule 7 is the expansion of a registration procedure (currently available to in-house counsel admitted in another U.S. jurisdiction but working in Tennessee) to foreign legal counsel employed as a lawyer by an organization as well. In connection with that development, a 180-day amnesty period for foreign legal counsel presently practicing in Tennessee is on offer (as occurred in the past with the in-house counsel provisions).

Second, while the provisions addressing the right to practice pending admission have been explicitly tweaked to make clear that someone can apply and obtain that authority whether seeking admission by comity or by sitting for the bar exam (or, now that TN has embraced the UBE, submitting a score on the UBE from another jurisdiction), the rule has also been amended to make plain that a disciplinary complaint filed against someone practicing pursuant to the practice pending admission rule is also a disciplinary complaint against the attorney who is on record as being their supervising attorney (as is also the case with qualified law students permitted to engage in limited practice in compliance with the rules.

The adoption of a new rule permitting collaborative family law practice in Tennessee has been in the works since 2017 but was finally implemented this week and takes effect immediately. You can read the entirety of new Tenn. Sup. Ct. R. 53 here.

For those unfamiliar with the concept of collaborative family law practice (and I suspect there are many of you), a review of the rule is worth your time to get a flavor for the dynamic. One of the most important pieces is the notion that lawyers engaged in this kind of representation are prohibited in almost all circumstances from engaging in any litigation proceedings on behalf of the party they are representing related to the issue for which the collaboration is focused. (Which is a bit of weird end around on what would otherwise likely be viewed as a restriction on the right to practice in violation of our RPC 5.6.) In terms of impact on lawyer ethics, the other piece of the rule that has a direct impact is the piece that provides relief from the imputation of a collaborative lawyer’s conflicts to other lawyers in their firm in instances where the representation involves a person of “low income.” Specifically:

Section 10. Exception from Disqualification for Representation of Low-Income Parties.

After a collaborative family law proceeding concludes, another lawyer in a law firm with which a collaborative lawyer disqualified under Section 9, Subsection (a), is associated may represent a party without a fee in the collaborative family law matter or a matter related to the collaborative family law matter if:

(a) the party has an annual income that qualifies the party for free legal representation under the criteria established by the law firm for free legal representation;

(b) the collaborative family law participation agreement authorizes that representation; and

(c) the collaborative lawyer is isolated from any participation in the collaborative family law matter through procedures with the law firm that are reasonably calculated to isolate the collaborative lawyer from such participation as set out in Tenn. Sup. Ct. Rule 8, RPC 1.10.

A teachable moment to make your eyes water.

When you spend a lot of time consulting with and advising lawyers, finding teachable moments from examples of things that happen in real life are extremely helpful.

The world can be filled with teachable moments. On a non-ethics front, here is one: If you don’t pay attention to when a credit card has a new expiration date and update accordingly, you could end up having your domain briefly expire leaving you vulnerable to someone else potentially buying it.

On an ethics front, the importance of making sure you do what you can to make clear in an engagement letter who is and who is not your client, as well as what you are being hired to do versus other things someone might later try to claim were your responsibility is pretty high. As a result, paying attention to outside counsel guidelines or other documents that may come into your firm from a client that address those issues is extremely important.

A February 2019 case from the Federal Circuit stands as a very good teachable moment about how not paying attention to such things can lead to disqualification. If you practice in a law firm of any significant size, the full opinion is worth reading because it addresses not only the topics mentioned but also involves a fact pattern involving lateral movement that, ultimately, resulted in the disqualification proceedings coming to pass in the first place. Specifically, the lawyers who moved from another firm to Katten Muchin and brought with them their representation of a party adverse to a corporate parent of Bausch & Lomb in the first place were only ever informed that Katten Muchin was representing Bausch & Lomb.

The disqualification of the law firm of Katten Muchin in the lawsuit of Dr. Falk Pharma Gmbh et al. v. Generico, LLC et al. truly came about, however, because the firm did not push back on outside counsel guidelines it received that expanded the universe of what could constitute a conflict of interest (or, more realistically, didn’t pay attention at any true level that such was occurring).

The underlying moving parts of litigation are pretty detailed and intricate and involve patent litigation and trademark matters, part of which (I only mention to bring a satisfying end to the attempt at humor in my title) involved a dispute over the trademark MOISTURE EYES™.

If you want a more thorough understanding of the intellectual property issues in play in the various proceedings, you can get that over at Mike McCabe’s blog here.

For our purposes today, w/r/t the teachable moments, the following excerpts from the opinion ought to be able to drive home the importance of knowing what is in engagement letters that come from clients rather than emanate from your firm and knowing the details of any outside counsel guidelines being incorporated into any engagement letter:

The motions to disqualify stem from Katten’s representation of Bausch & Lomb Inc. … a corporate affiliate of Valeant-CA and Salix, in a trademark litigation and its concurrent representation of Mylan, adverse to movants, in the pending appeals. Specifically, Katten signed an engagement letter with Bausch & Lomb that broadly defined Katten’s client as any Valeant entity. Attorneys [Mukerjee and Soderstrom] represented Mylan during various stages of [these proceedings] first, as attorney from Alston & Bird LLP, but later, as attorneys from Katten. The parties agree that Mukerjee and Soderstrom moved to Katten as of May 3, 2018.

[snip]

In the course of representing Bausch & Lomb, Katten signed a general engagement letter “governing the overall relationship between [Katten] and Valeant Pharmaceuticals International, Inc…. This engagement letter incorporates by reference Valeant’s Outside Counsel Guidelines (“OC Guidelines…”

[snip]

The OC Guidelines also specify that “Valeant expects a significant degree of loyalty from its key external firms,” defined as “firms with 12 month billings exceeding one million dollars.” These key firms should “not represent any party in any matters where such party’s interests conflict with the interests of any Valeant entity.”

[snip]

On May 3, 2018, Mylan notified the district court that Mukerjee and Soderstrom had left Alston & Bird to join Katten. On May 25, 2018, Valeant-CA filed a motion to disqualify Katten in the district court action.

[snip]

Because the engagement letter creates an ongoing attorney-client relationship between the law firm, Katten, and its organizational clients, Valeant-CA and Salix, Katten’s representation of Mylan adverse to movants in Valeant II gives rise to a concurrent conflict of interest under Rule 1.7.

[snip]

Finally, we conclude that Katten’s erection of an ethical wall is insufficient to resolve its violation of Rule 1.7. Katten claims that this wall cordons off Mukerjee and Soderstrom from Katten attorneys who have worked for matters for Bausch & Lomb, Valeant-CA, or affiliates in the 18 months preceding May 7, 2018. But this wall does nothing to address concerns stemming from Katten’s violation because it was created after Mukerjee and Soderstrom joined Katten, it applies only partially to work conducted within 18 months before May 7, 2018, and Katten never previously informed movants of any potential conflict.

Now, in fairness, even without the engagement letter terms and the OC Guidelines, the outcome may have been the same because, as the opinion explains, the corporate entities involved here were so interrelated in terms of common infrastructure and shared legal departments, and financial interdependence as to be treated as amounting to corporate affiliates still subject to treatment as clients under conflict of interest rules. But that is another teachable moment issue for a different day.

A recipe for ethical lawyering?

Now that the Ethics Roadshow is complete in all of the cities where it was staged, I want to repackage the main idea from this year into a post and make a similar ask of my readers that I made of the attendees as to feedback on the point.

The title of the Roadshow this past year was “Back to Basics: Sailing the Five Cs of Ethical Lawyering,” but the main ultimate question or conceit when boiled down was whether the 5 Cs I had identified could provide not only a basic road map for being an ethical lawyer no matter the nature or setting of your practice but could also provide the ingredients of a recipe that can be used to justify the existence of those pieces of the ethics rules that are absolutely worth keeping moving forward in discussions about the future of legal ethics and lawyer regulation. 

The 5 Cs as put forth as the ingredients of the recipe were:

  • Be COMPETENT at what you do
  • Recognize and respect your obligations of CONFIDENTIALITY
  • COMMUNICATE appropriately with your clients (and others) both as to content and frequency
  • Employ CANDOR in all situations in your practice [If you absolutely cannot be 100% truthful, and can’t simply stay silent, then don’t be false.]
  • Avoid CONFLICTS for which you don’t have, or cannot get, consent.

Recognizing that some people might immediately think of another important “C,” avoiding commingling I then offered thoughts about how quite clearly rules about trust accounting could be readily reverse-engineered by combining ingredients.  I initially suggested that Competence + Candor + Communication could do the trick; some others suggested that particularly the requirement to avoid commingling could be described as Candor + Communication + Conflicts.

There are a number of different groups at work on trying to make progress on what the modern regulation of the practice of law should look like.  One of those is APRL’s Future of Lawyering Committee.

I’m fortunate to be a member of that committee and our mission is this:

[T]o explore the evolving nature of technology and its impact on the delivery of legal services and access to justice.  Our goal is to develop specific proposals for amending the legal ethics rules and reforming the lawyer regulatory process.

And so my ask of you is the same as my ask of attendees: Unless a rule is truly, and absolutely, required in order to protect consumers of legal services, shouldn’t the rules worth revisiting be the ones that are hard, if not impossible, to describe using a combination of ingredients from this recipe?

Asking for a conflict waiver is a step that is hard to take back.

Look, I understand too little too late
I realize there are things you say and do
You can never take back
But what would you be if you didn’t even try
You have to try
So after a lot of thought
I’d like to reconsider
Please
If it’s not too late
Make it a cheeseburger

– Lyle Lovett

Working though questions of conflicts of interest can certainly be challenging for lawyers.  The initial phases of figuring out whether a conflict exists are highly important.

From a loss prevention standpoint, you want to get it right as you certainly do not want to take something on that you shouldn’t because you had a conflict that you simply couldn’t even ask to be waived or for which you strongly suspected you’d never be able to get a waiver from those from whom a waiver would be needed.

It is also important to get right, however, so that you don’t treat something as a conflict that isn’t a conflict.  Once you start down the path of asking someone for a conflict waiver, you empower them to tell you “no” and you potentially reduce your choices about what to do in such event pretty severely.  It is not impossible to change course after unsuccessfully asking for a conflict waiver and begin to claim that the waiver wasn’t needed in the first place.  But it is certainly difficult.  Thus, it isn’t just the case that you don’t want to treat something as a conflict that isn’t a conflict; you also might want to think long and hard about treating something as a conflict if you intend to contend it isn’t a conflict.

An interesting story touching on just how difficult unwinding such a situation can be was written about by The American Lawyer earlier this week.  It involves an effort – seldom used (for reasons that ought to be a bit obvious) — to file a separate lawsuit seeking a declaratory judgment that something was not a conflict in the first place and an injunction to allow the lawyer to start working for a new firm.

You can read the full article here, but the short version is this: a Houston lawyer who was looking to change firms has been unable to do so because a corporate entity much in the news of late – USA Gymnastics — refused to provide a conflict waiver requested by the lawyer.  USA Gymnastics is a client of the lawyer’s former firm.  The firm to which the lawyer had hoped to move currently represents a number of individuals who have sued USA Gymnastics over the sordid situation involving Larry Nassar.

Typically, conflicts of interest get litigated through motions to disqualify.  Although firms and clients do not like to have to deal with those for obvious reasons, at least in those proceedings the firms and clients have the ability to argue that the party moving for disqualification has the burden of proof.  Even that procedural tool can be lost when the lawyer or firm is the one bringing the action to ask a court for a ruling that they have no conflict.

A quote from the story itself taken from the managing partner of the firm to which the lawyer wanted to go to work provides a helpful bit of transition:

The law as we understand it is that if a person worked at a law firm and doesn’t work on a case, and goes to work for another law firm that has that case and [the lawyer] is shielded from the case … there’s no conflict.

Now, if this were being governed by Tennessee law, I could readily delve into whether that statement would be correct or incorrect assertion of the state of play here, but these are events that involve other states and different rules.

But, to repeat the larger point, if that is what the relevant law or rules set out, then the lawyer and his new firm should never have sought the waiver in the first place.