Advance Conflict Waivers: Look Before You Leap Presented by Richard Zielinski April 9, 2009
1. What is an Advance Conflict Waiver? (a) A waiver given by a client (b) To a potential future representation () (c) By the client s law firm (d) That would otherwise be prohibited by the ethics/conflicts rules
2. What Does an Advance Waiver Look Like? A typical advance waiver paragraph in an engagement letter: The Company agrees that, notwithstanding our representation of the Company in general corporate matters we may, now or in the future, without t seeking or obtaining i your further consent, represent other persons, whether or not they are now clients of our law firm, in other matters, including litigation, where those other persons are adverse to the Company. The Company also agrees not to seek disqualification of our law firm should the firm sue the Company in the future.
3. What is the Law on Advance Conflict Waivers? In order to fully analyze an advance waiver problem one must be conversant with three bodies of authority: (a) Ethics Rules (b) Ethics Opinions (c) Case Law
ABA Model Rule of Professional lconduct t1.7 (a) Notwithstanding the existence of a concurrent conflict of interest a lawyer may represent a client if: i. The lawyer reasonably believes that the lawyer will be able to provide competent t and diligent representation ti to each affected client; ii. iii. iv. The representation is not prohibited by law; The representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and Each affected client gives informed consent, confirmed in writing.
Comment 18 to Model Rule of Professional lconduct t1.7 Informed consent requires that the client: (a) Be aware of the relevant circumstances (b) Be aware of the material and reasonably foreseeable ways the conflict could adversely affect the client s interests (c) Agree to the proposed representation after the lawyer communicates the material risks and alternatives
Comment 22 to Model Rule of Professional lconduct 1.7 (a) The effectiveness of an advance waiver is determined by the client s understanding of the risks of waiver. (b) The more comprehensive the explanation of future representations that may arise, the greater the likelihood lih the client will have the requisite it understanding. (c) If the client is an experienced user of legal services and reasonably informed regarding the risks of a conflict, consent is more likely to be deemed effective (d) If the client is independently represented by counsel in giving consent and (d) If the client is independently represented by counsel in giving consent and consent is limited to future conflicts unrelated to the subject of the representation, consent is more likely to be deemed effective.
ABA Formal Opinion 93-372 ABA Formal Opinion 93-372372 sets out the factors to consider in Drafting an advance waiver: (a) Whether the future "unrelated" matter is adequately identified; (b) Whether the party giving the waiver is adequately sophisticated; (c) Whether the waiver is based upon adequate information; (d) Whether the waiver is recent enough; and (e) Whether the waiving party had an opportunity to seek independent () gp y pp y p counsel s advice.
ABA Formal Opinion 05-436 (a) Incorporates much of Formal Opinion 93-372 but expands its scope (b) Model Rule of Professional Conduct 1.7 permits effective informed consent to a wider range of future conflicts than would have been possible under the Model lrules prior to their amendment. (c) Looks to Comment 22 of 2002 amendments to ABA Model Rules, which was non-existent when Formal Opinion 93-372 issued.
Association of the Bar of the City of New York Formal Opinion i 2006-01 01 (a) Recognizes that the paradigm of a lawyer servicing all the legal needs of a client no longer applies. (b) The increase in potential conflicts has led to an increase in disfavored tactical disqualification motions. (c) An overly broad interpretation of the duty of loyalty can strip even a long-standing client of the right to counsel of its choice, thereby depriving the client of the law firm s loyalty. (d) For a sophisticated client, an open-ended advance waiver that is accompanied by even a relatively limited disclosure about the prospective conflicting matters is enforceable. (e) An advance waiver would even be enforceable with respect to substantially related matters where the client is sophisticated, the waiver is not applied to opposing sides, and safeguards are taken to protect client confidences.
Kennecott Copper Corp. v. Curtiss-Wright Corp., No. 78 Civ. 1295 (S.D.N.Y. April 10, 1978) (a) Curtiss-Wright retained Skadden, Arps to represent it in a tender offer for Airco that led to ongoing federal securities litigation (b) While Skadden was counsel in litigation, Curtiss-Wright began a proxy fight to unseat management of Kennecott, which retained Skadden to advise it. (c) Motion to disqualify Skadden was denied because of advance waiver held valid for the following reasons: i. Although [t]he retainer agreement [was] not a model of clarity, Skadden specifically requested the advance waiver from Curtiss-Wright as it was unwilling to close its doors to future clients by risking disqualification in its field of specialty. ii. Sophisticated lawyers on both sides surely knew that an adversarial representation would create a future conflict should Skadden represent a target company in a future takeover battle. iii. The waiver clause expressly allowed concurrent adverse representation on future matters. iv. The waiver clause would be meaningless if Skadden was not free to represent any client in any takeover attempt t with no risk of disqualification, even though h Curtiss- Wright happened to be in an adversarial position.
Worldspan, L.P. v. Sabre Group Holdings, Inc., 5 F. Supp. 2d 1356 (N.D. Ga. 1998) (a) The law firm s standard engagement letter failed to provide informed prospective consent to a conflict arising five years after the letter; (b) The letter did not specify the nature of the potential future adverse representation; tti (c) The waiver was too remote in time from the conflict (d) The letter did however expressly indicate that the firm represented (d) The letter did, however, expressly indicate that the firm represented airlines with interests potentially adverse to Worldspan, but failed to identify the clients with whom the conflict ultimately arose.
Visa U.S.A., Inc. v. First Data Corp., 241 F. Supp. 2d 1100 (N.D. Cal. 2003) (a) (b) (c) (d) (e) At the time Heller Ehrman accepted a patent infringement representation, the firm informed First Data that it could not represent it unless it agreed to permit the firm to represent Visa in future disputes arising between First Data and Visa. The fact that the waiver included litigation was clear, and the signer was sophisticated. The advance waiver of potential future conflicts was permitted, even where the exact nature of the conflict ct was not precisely identified. ed. The only inquiry that needs to be made is whether the consent was fully informed. The factors to be considered are: the breadth of the waiver, its temporal scope, the quality of the discussion i with client, the specificity it of the waiver, the nature of the actual conflict, the sophistication of the client and the interests of justice.
Concat LP & Chelator, LLC v. Unilever, PLC, 350 F. Supp. 2d 796 (N.D. Cal. 2004) (a) Morgan Lewis standard prospective waiver was insufficient to demonstrate informed consent by the client where: i. The waiver was extremely broad, ii. The waiver was intended to cover any eventuality, iii. iv. The waiver was unlimited temporal scope, and There was no evidence of discussion of the waiver with the client, who admittedly was sophisticated. (b) The court disqualified Morgan Lewis based on its failure to secure a second, more specific waiver, when the Morgan Lewis conflict arose.
In re: Congoleum Corp., 426 F.3d 675 (3d Cir. 2005) (a) The Gilbert Heintz firm represented insured in bankruptcy coverage action and represented personal injury claimants as co-counsel in negotiating settlement arrangements against the insured. (b) The conflict was not properly waived where GH did not receive effective waivers from claimants, and relied upon co-counsel to obtain waivers from claimants. (c) There was no evidence that any information was provided to claimants nor any indication of claimants waiver.
McKesson Info. Solutions v. Duane Morris, No. 2006 CV 12110 (Fult. Super. GA 2006) (a) Duane Morris concurrently represented 2 individuals against McKesson in an intellectual property arbitration proceeding and 2 McKesson subsidiaries in a bankruptcy matter. (b) The court originally i disqualified dduane Morris notwithstanding t an advance waiver for failure to identify specific adverse clients and details of adverse representation. (c) In recognition of new facts, the court reversed its earlier disqualification given that the bankruptcy matter was concluded and found that the disqualification was inherently unreasonable.
Avocent Redmond Corp. v. Rose Electronics, 491 F. Supp. 2d 1000 (W.D. Wash. 2007) (a) Heller Ehrman represented company in general corporate legal counseling, IP transactions and commercial leasing and another HE client sued sister corp in patent infringement litigation (b) Court found sister corp was client of HE based on language in engagement letter ( represent Company, parent and its affiliates ) (c) Court found advance waiver ineffective because it applied only to unrelated matters and because only parent company agreed to waive prospective conflicts (d) Heller Ehrman disqualified from representation
Colene Corp. v. KV Pharmaceutical Co., Case No., 07-4819, 2008 WL 2937415 (D.N.J., July 29, 2008) (a) Buchanan firm represented Celgene Corp. in patent, securities, transactional and litigation matters for over four years (b) Celgene agreed to advance waiver provision in 2003 related to securities litigation matter and in 2006 to patent matter (c) Celgene sued KV (generic drug), Buchanan entered appearance for KV, and Court disqualified Buchanan (d) Hld Held waiver fild failed to satisfy if informed if consent requirement because proposed future course of conduct was open-ended and vague as to: whether Buchanan would accept representation adverse to Celgene in patent matters; risks of the proposed course of conduct (i.e. would Buchanan represent a generic drug co. in patent litigation); and what reasonably available alternatives were to proposed course of conduct (i.e. defining substantially related or agreeing to not represent generic drug co.).
Presenter s Biography RICHARD M. ZIELINSKI is a Partner in the Boston law firm of Goulston & Storrs, P.C. He is a graduate of Colgate University and Harvard Law School. Mr. Zielinski is a general trial lawyer who concentrates in complex business and real-estate disputes, legal-malpractice defense, and sophisticated products liability and mass torts cases. Mr. Zielinski is listed in The Best Lawyers in America in three separate categories and, in 2007, was voted by his peers as one of the top 100 Superlawyers in New England. He is listed in Chambers USA as one of America s Leading Lawyers for Business. He is a past member of the Massachusetts Board of Bar Overseers and the Boston Bar Association Council, a fellow of the American College of Trial Lawyers and a Trustee of Massachusetts Continuing Legal Education (MCLE), Inc. Mr. Zielinski regularly teaches at trial-advocacy workshops sponsored by the American College of Trial Lawyers, Harvard Law School, and MCLE. In addition, he has taught more than fifty continuing legal education seminars on evidence, trial practice, legal ethics and substantive litigation topics.
Contact Information Richard Zielinski, Esq. Direct Dial: (617) 574-4029 Fax: (617) 574-7664 Email: rzielinski@goulstonstorrs.com