In 2017, a lawyer moving from one law firm to another is a pretty common place occurrence. Anyone who has been through the process knows how personally difficult and stressful the ordeal can be no matter how excited you are about your next destination. The emotional and personal components alone can be trying, but the pressures imposed by the ethics rules are often overlooked … even though they shouldn’t be.
One area where the requirements of the ethics rules can make a potential lateral move nearly impossible is if a lawyer is looking to join a firm that is on the other side of an ongoing legal matter. A well-done, quite succinct ethics opinion out of North Carolina issued near the end of January 2017 explains what the ethics rules actually require in order for such a move to be possible. (And, important note to add, we’re only talking about if the lawyer looking to lateral is looking at moving from one private practice position to another private practice position. Moves into and out of government employment are different and governed by different rules.) North Carolina Formal Ethics Op. 2016-3, titled “Negotiating Private Employment With Opposing Counsel,” lays out the sticking point that make this kind of lateral move more difficult than others — there comes a point in time when any such discussions have become serious enough — even though there is not yet any done deal — that both sets of clients have to give their informed consent for the negotiations/discussions to continue.
The ethics risk that mandates this result is the “material limitation” conflict that arises from the personal interests of the lawyers involved requiring consent under Rule 1.7(a)(2). In laying this out, the North Carolina opinion echoes sentiments previously expressed in (1) an ABA Formal Opinion from 1996, (2) The Restatement (Third) of the Law Governing Lawyers, and (3) a Kentucky ethics opinion issued in 1998.
The North Carolina opinion also provides a similar description as did those other authorities of the moment in time that matters in terms of triggering the need to obtain the client’s consent: when the discussions become “substantive.” The opinion also describes, in practical terms, what is necessary for each side of the potential lateral discussion to seek out and obtain consent from its respective client:
To obtain the client’s informed consent, the job-seeking lawyer must explain to the client the current posture of the case, including what, if any, additional legal work is required, and whether another firm lawyer is available to take over the representation should the lawyer seek to withdraw. If the client declines to consent, the job-seeking lawyer must either cease the employment negotiations until the client’s matter is resolved or withdraw from the representation but only if the withdrawal can be accomplished without material adverse effect on the interests of the client. Rule 1.16(b)(1). Because personal conflicts of interests are not imputed to other lawyers in the firm, another lawyer in the firm may continue to represent the client. Rule 1.10(a).
Similarly, the hiring law firm must not engage in substantive employment negotiations with opposing counsel unless its own client consents. If the client does not consent, the firm must cease the employment negotiations or withdraw from the representation. The firm may only withdraw if the withdrawal can be accomplished without material adverse effect on the interests of the client. Rule 1.16(b)(1).
Most lawyers like to think of themselves as being risk averse as a general matter. Interestingly enough, when the depths of the details are fully mined, the notion of doing what the North Carolina opinion indicates is required might seem riskier than not saying anything at all. The situation gets more difficult for some lawyers to work through because it can be viewed as something of a modified prisoner’s dilemma situation — each side of the potential employment discussion may be making its own independent decisions about whether the situation has escalated to a point of seriousness where client notification and consent is required, and each side has its own thoughts about what is the right answer for each side (stop talking or withdraw) if the affected clients won’t consent. While the two parties to the discussions might seemingly be in harmony about the potential move otherwise, they may very well have starkly different views in terms of balancing how important they value the business of the affected client versus the business that could be gained from the lateral move.
As a result, I have long suspected that most such moves that actually come to fruition are the products of one side or the other not strictly complying with their ethical requirements. No, that is probably too cynical a thing to say and certainly a bit of an exaggeration of my view.
Some percentage of the moves that actually work out are the product of something less than strict compliance. Probably not the majority, however.
The majority of them likely either involved matters for clients who are so incredibly important to the economics of the deal that there is a need to know sooner rather than later whether the impacted clients will consent or matters for clients who are of such little economic significance that all of the lawyers involved would be happy to jettison their matter if consent is not forthcoming.
An even more important factor in play that likely can be dispositive about whether such a move can be made is whether the jurisdiction involved permits the use of nonconsensual screening to avoid imputation of a disqualifying conflict. No mention is made of this topic in the North Carolina opinion because North Carolina does not have any language in its version of Rule 1.10 to permit such screening.
In Tennessee, scenarios involving lawyers who aren’t litigators are potentially much more viable lateral moves because of our weirdish rule that treats “side switching” situations in litigation differently than in other contexts. In Tennessee, whether a nonconsensual ethics wall can be erected to avoid disqualification from a lateral move can have a different answer depending on whether the matter is a litigation matter or not.
Our RPC 1.10 reads in relevant part:
(c) Except with respect to paragraph (d) below, if a lawyer is personally disqualified from representing a person with interests adverse to a client of a law firm with which the lawyer was formerly associated, other lawyers currently associated in a firm with the personally disqualified lawyer may represent the person, notwithstanding paragraph (a) above, if both the personally disqualified lawyer and the lawyers who will represent the person on behalf of the firm act reasonably to:
(1) identify that the personally disqualified lawyer is prohibited from participating in the representation of the current client; and
(2) determine that no lawyer representing the current client has acquired any information from the personally disqualified lawyer that is material to the current matter and is protected by RPC 1.9(c);
(3) promptly implement screening procedures to effectively prevent the flow of information about the matter between the personally disqualified lawyer and the other lawyers in the firm; and
(4) advise the former client in writing of the circumstances that warranted the implementation of the screening procedures required by this Rule and of the actions that have been taken to comply with this Rule.
(d) The procedures set forth in paragraph (c) may not be used to avoid imputed disqualification of the firm, if:
(1) the disqualified lawyer was substantially involved in the representation of a former client; and
(2) the lawyer’s representation of the former client was in connection with an adjudicative proceeding that is directly adverse to the interests of a current client of the firm; and
(3) the proceeding between the firm’s current client and the lawyer’s former client is still pending at the time the lawyer changes firms.
Thus, a Tennessee lawyer could make a move from one side of the table to the other in the middle of a $50 million real estate deal but could not make the same move if it involved moving from one side of the “v” to the other in a $10,000 automobile accident lawsuit.