1 Conflicts of Interest You Can t Be Everyone s Best Friend or Their Lawyer, Either Claude E. Ducloux Attorney At Law Board Certified Texas Board of Legal Specialization Civil Trial Law Civil Appellate Law Director of Education LawPay Presented at Practice 360 D.C Bar May 19, 2017
2 Agenda 4 c omm on c onflic t s c e na rios whic h p rohib it representation What are the Encounter Points which can c re a te/ a lter Conflic ts How to Ma ke Full Disc losure 3 Questions A Lawyer asks Dutie s of a la wye r whe n Conflic ts Aris e Doing b us ine s s with a c lie nt - e thic a lly A close look at some recent Conflict cases Be s t Ad vic e
3 ABA Model Rule 1.6 (a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).
4 ABA Mod e l Rule 1.6(b ) (b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary: (1) to prevent reasonably certain death or substantial bodily harm; (2) to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer's services;
5 ABA Model Rule 1.6(b) (3) to prevent, mitigate or rectify substantial injury to the financial interests or property of another that is reasonably certain to result or has resulted from the client's commission of a crime or fraud in furtherance of which the client has used the lawyer's services; (4) to secure legal advice about the lawyer's compliance with these Rules; (5) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of the client;
6 ABA Model Rule 1.6(b) (6) to comply with other law or a court order; or (7) to detect and resolve conflicts of interest arising from the lawyer s change of employment or from changes in the composition or ownership of a firm, but only if the revealed information would not compromise the attorney-client privilege or otherwise prejudice the client.
7 ABA Model Rule 1.6(c) (c) A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.
8 THE LAW - The Dis c ip lina ry Rule s of Your Sta te: Most States have versions of the ABA Model Rule s ; - State Case law - The Opinions of the Professional Ethics Committee of your State His toric a l Bib lic a l De riva tion: Ma tthe w 6:24: No m a n can serve two masters
9 Four Situations Which Prohibit Representation 1 Litig a tion: Representing parties in the s a me litig a tion.
10 Four Situations Which Prohibit Representation Business: 2 Representing someone in a Substantially Related matter where interests are Materially and Directly Adverse.
11 Four Situations Which Prohibit Representation Other Duties: 3 Representation when it Reasonably Appears your duties to another client, third pa rty or to your firm conflict.
12 Four Situations Which Prohibit Representation 4 Past Matter Pre vious c lie nt s intere s t c onflic t whe n a d is p ute a ris e s with same matter/ same p a rtie s.
13 When do Conflicts Arise? Conflic ts Aris e in Thre e Prim a ry Encounter Points: 1. Initia l Conta c t 2. Introduction of New Parties/Counsel 3. Unexpected Change in Circumstance
14 Encounter Point 1: Initia l Conta ct Proble ms 1. Uns olic ited information in e ma ils, le tters a nd phone calls: protect yourself! 2. During interviews: you need good interview s kills! Don t ta lk to s ome one for 45 minutes and then discover the conflict. Ask who is involve d? EARLY ON.
15 Interviewing Skills a MUST! Good la wye rs le a rn to ve t p otentia l c onflic ts e a rly in any new interview! (The first 5 minutes rule: always determine, Who are the parties and entities involved. ) Remember: the client who pours out his heart to you has justifiably formed an attorney c lie nt re la tions hip.
16 Resolution of Initial Contact Conflic ts Know what to do when you discover an early c onflic t 1. Inform c lie nt 2. Return any documents or information 3. Disclaimer: I cannot represent you 4. De s troy d ig ita l information whic h c a n t b e returned
17 What About Website Contact? Firms are advised to have a click tab requiring a p e rson m a king a n uns olic ited c onta c t via a firm website to wa ive c onfid e ntia lity: WARNING: DO NOT SEND or include any information if you consider the information confidential. By sending this you agree that the information does not create a lawyer-client relationship, and that any information is not confidential and not privileged.
18 Recent Texas Prof Ethics Opinion 651, November 2015 Although there is no legal/ethical requirement to require such a warning tab, it is the ONLY WAY to protect yourself from the conflict of interest, fiduciary duty obligations with reference to prospective confidential information from prospective clients. Without such warning: You can t merely delete; No presumption that Client should not expect reasonable privacy. Thus, without the warning, your acquisition and use of information from prospective clients for yourself or another client is judged under the Disciplinary Rules.
19 Encounter Point 2: Introduction of New Parties Most often this occurs when: 1. A c onflic ted p a rty c ome s into a d e a l, a contract, a lawsuit, or 2. A ne w la wye r is hire d b y firm, c re a ting c onflic t, and the rules prohibit you from staying in the c a se. When it happens: Know how to get out.
20 Encounter Point 3: Your Activities & Businesses The third p rim a ry a re a whe n c onflic ts d e ve lop a re : the La wye r s Own Ac tivitie s : Doing Bus ine s s with Clie nt Ha ving Bus ine s s Conflic ts with Clie nt Lawyer Serving on Organizations Law Firm s Business Interests, including Pa rtne rs a nd As s oc ia tes (inc lud ing re a l estate)
21 Dangerous Situations Lawyer is a Member of Organization & Counsel to same Ta king Inc ons is tent Le g a l Pos itions before Agencies or Courts Representing both Officers and Org a niza tion its e lf
22 Dangerous situations Representing both Employee and Comp a ny or Ag e nc y (multip le representation) [Use Tag-a long counsel ] Imp uted Dis q ua lific a tion (Pa rtner/associa te)
23 John Rothermel s 3 Questions 1 Ask yourself: Between Parties: Will my representation of A be materially and directly adverse to the interest of B?
24 John Rothermel s 3 Questions 2 To Third Parties: Do I have any duties to third parties which will limit my representation of either A or B?
25 John Rothermel s 3 Questions 3 My own or my firm s interests: Is my representation of A or B adversely limited by my own interests?
26 Rights and Duties The lawyer has the duty to bring up the conflict (not the Client)
27 Rights and Duties The lawyer has the duty to make sufficient disclosure.
28 Rights and Duties The lawyer has the duty to secure permission.
29 Rights and Duties The lawyer has the duty to withdraw when appropriate.
30 Watch out for EXCEPTIONS! Comple te Disclosure AND Pe rmission Me re d is c los ure is not s uffic ie nt La wye r m us t s till re a s ona b ly b e lie ve that their interests will not be affected by joint representation DISCLOSURE MUST MEET ABA Rule STANDARDS
31 Complete Disclosure The existence of the conflict The nature of the conflict The implications of the conflict Possible adverse consequences of common representation Advantages of common representation
32 Doing Business with a Client Mus t b e fa ir to c lie nt Mus t ha ve full d is c los ure Must have a writing to protect yourself Give client the right to seek independent a d vic e GET THE CONSENT IN WRITING!
33 Leaving Government Employment Firm ma y us e Chine s e Wa ll (now referred to as Screening ) Must notify Agency where you worked the Agency has a right to know and object.
34 Screening an Incoming lawyer Incoming lawyer must be screened from p a rtic ip a tion in p os s ib le c onflic t Screened means a written firm plan, no use of files, no access to database, and no participation in firm conferences about the case Be prepared to testify as to implementation of the Screen
35 New Case Law In Re RSR Corporation, Texas Supreme Court, , December 4, 2015 RSR represented by Bickel & Brewer, sues Inppamet, (a Chilean manufacturer of mining anodes) for, inter alia, breach of a licensing agreement and misappropriating trade secrets.
36 The Sobarzo Papers Sobarzo is a disaffected Inppamet employee who resigns from Inppamet in 2010, taking 2.3GB of data with him, including 17,000 e ma ils a nd inc lud ing a ttorne y-c lie nt communications between Inppamet and la wye rs. SOBARZO offers these documents/ s to RSR s ATTORNEYS! The Attorneys a cce pt and review them.
37 Disqualification of Lawyers Results Inppamet m ove s to d is q ua lify RSR s Attys because they have freely viewed the documents Sobarzo took, many of which were allegedly privileged or confidential. Court disqualifies Attorneys, citing: In Re American Home Products, 985 S.W.2d 68 (Tex. 1998) and finding that lawyers should have screened Sobarzo from participating in the case.
38 Appeal to Texas Supreme Court THE ISSUE: What is the standard that a p p lie s to fa c t witne s s e s d ivulg ing information about a former employer? AND, is that different from how we treat a le g a l a s s is ta nt m oving b e twe e n firms?
39 Supreme Court Holds TX Supreme Ct holds American Home Products (1998) applies to law firm employees. It s the Wrong Standard in this case, which is a third party former employee of opposing party. The correct standard to guide the Trial Court is In Re Meador, 968 S.W.2d 346 (Tex. 1998). Supreme Court says it is clear Sobarzo supplied significant information regarding Inppamet...
40 American Home Standard Supreme Court says under American Home Products, there is a presumption that the firm is irreparably tainted by not shielding the legal assistant, thus genuine threat exists that they ll use the information. But Sobarza is a fact witness and a different standard applies. So, what happens when someone drops confidential information in your lap?
41 The Meador Standards Tx. Sup. Court remanded it to Trial Court to discuss these factors: 1. Whether the attorney knew or should have known that the material was privileged. 2. The promptness with which the attorney notifies the opposing side of receipt of privileged information. 3. The extent to which the attorney reviews and digests the privileged information. 4. The significance of the privileged information: prejudicing a claim or defense and the extent to which return may mitigate the prejudice. 5. The extent to which the Movant may be at fault for unauthorized disclosure. 6. The extent the non-movant will suffer prejudice from the disqualification of his or her attorney.
42 What s our Take-Away? You still don t have the right to review privileged documents produced surreptitiously by a former Employee. SO Don t look at documents provided by a disaffected employee, and if they arrive, notify the other party.
43 Where do we stand today? La wye rs Secretaries - Employees Referenced cases find three presumptions: Courts recognize that when a lawyer or staff member works on a client matter, there is a conclusive presumption that confidential information was imparted to the lawyer or staff member. A second conclusive presumption is that a lawyer moving to new firm shares the client s confidential information with the lawyers in the new firm. However, when a staff member moves to a new firm, there is a presumption that staff member shares clients confidential information but that presumption is not conclusive and it can be overcome by implementation of appropriate screening procedures. See Opinion 644 (August 2014) and Opinion 650 (May 2015)
44 Changing Firms La wye rs Secretaries Employees See TX Opinion 644 (August 2014) (Can t screen a lawyer employee who participated in c a s e ) and Opinion 650 (May 2015) (mayscreen non lawyer previous employee who did not work on matter) Profe s s iona l Ethic s Committee Opinion 472 (J une 1991)(a ls o a llows a le g a l a s s t to b e screened) Go to TXETHICS.ORG for copies of opinions
45 Best Advice Know whom you represent. Get consent in writing.
46 Be s t Ad vic e If you must withdraw from representing one client, us ua lly you m us t c om p le tely withd ra w.
47 Be s t Ad vic e Don t interview or recruit la wye rs involve d in the c urre nt c a s e. Wa it until it s over.
48 Be s t Ad vic e Remember your fiduciary duty to clients Intervie w we ll d is c ove r c onflic ts e a rly on in the first interview Be cognizant of encounter points. Get permission/waivers when a ppropria te.
49 My New Favorite Quote: When education works, behavior changes. -Charles Darwin What will you change in your practice?
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