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).