89-F-118 - Screening Procedures to avoid imputed disqualification

 

BOARD OF PROFESSIONAL RESPONSIBILITY OF THE SUPREME COURT OF TENNESSEE

FORMAL ETHICS OPINION 89-F-118


Inquiry is made concerning clarification of Formal Ethics Opinions 81-F-5 and 87-F-110 and the application of screening procedures as a viable method to avoid the imputed disqualification provisions of DR 5-105(D) of the Code of Professional Responsibility.

Formal Ethics Opinion 81-F-5 states that if an attorney practicing with a firm representing numerous plaintiffs transfers to another firm engaged in defending the same cases, the attorney's new firm will be disqualified "from any further participation in any of the cases in which the attorney had been representing the opposite side prior to the move." The opinion states that "when an attorney is barred from representation on the grounds of knowledge actually or presumably acquired from a former representation, then his entire firm is similarly barred."

In Formal Ethics Opinion 87-F-110, the question to be resolved was whether screening was a "viable and permissible means of avoiding the ethical disqualification of an attorney upon employment of a paralegal who had duties involving pending cases while formerly employed by adverse counsel."

In that opinion the Board cited the case of Smith v. Whatcott, 757 F.2d 1098 (10th Cir. 1985), in which the court found that a lawyer's move from one firm to another doomed the new firm's chance to oppose one of the attorney's former clients, despite the fact that the attorney had been totally uninvolved in the case in his new firm.

The Smith court stated that

disqualification [is required if] a substantial relationship exists between the pending suit and the matter in which the challenged attorney previously represented the client. "Substantiality is present if the factual contexts of the two representations are similar or related."

...

Once a substantial relationship has been found, a presumption arises that a client has indeed revealed facts to the attorney that require his disqualification. The majority of circuits that have considered the issue have held this presumption to be irrebuttable ...

The conclusion that two matters are substantially related also gives rise to a second presumption that the attorney shared information with his partners, thereby requiring the disqualification of the entire firm. Several courts have recognized a limited exception to this firm wide disqualification where the firm can prove that the attorney involved in the first matter has been effectively screened from financial interest and participation in the second case.

...

... The firm must have in place "specific institutional mechanisms" to block the flow of confidential information.

Smith, 757 F.2d at 1100-01 (citations omitted).

Although the attorneys in Smith had kept their files in their offices and did not allow access to the other attorneys in the firm and the tainted lawyer did not discuss his former representation or allow access to his files, the Tenth Circuit, nevertheless, upheld the disqualification of the firm. The court stated that "no specific institutional mechanisms designed to prevent inadvertent disclosure were in place when the firm accepted the case." Id. at 1101 (emphasis added).

The Board, after quoting Smith in Formal Ethics Opinion 87-F-110, specifically disapproved the screening exception "as a method of preventing vicarious disqualification wherein there is a potential for harm." Recently, the Sixth Circuit Court of Appeals joined in the Tenth Circuit in recognizing the factors which the Seventh Circuit had listed in Schiessle v. Stephens, 717 F.2d 417 (7th Cir. 1983) and LaSalle Nat'l Bank v. County of Lake, 703 F.2d 252 (7th Cir. 1983), as appropriate for consideration by the trial court in determining whether "specific institutional screening mechanisms" had been implemented "to effectively insulate against any flow of confidential information from the quarantined attorney to other members of his present firm." Manning v. Waring, Cox, James, Sklar and Allen, 849 F.2d 222, 225 (6th Cir. 1988).

The Manning court, quoting Schiessle, stated that these factors included, but were not limited to

the size and structural divisions of the law firm involved, the likelihood of contact between the "infected" attorney and the specific attorneys responsible for the present representation, the existence of rules which prevent the "infected" attorney from access to relevant files or other information pertaining to the present litigation or which prevent him from sharing in the fees derived from such litigation.

Manning, 849 F.2d at 226.

Determination of whether screening procedures had been implemented would be based on "objective and verifiable evidence" presented at trial and would be made by the trial court "on a case-by-case basis." Id. at 225-26.

In Manning, the facts considered by the district court presented the question of whether the entire law firm should be disqualified by a conflict of interest because a member of the firm had represented a certain client prior to his joining the firm. Under these facts the district court held that the presumption of shared confidences was irrebuttable. However, the Sixth Circuit Court of Appeals concluded that the presumption was rebuttable.

In determining that one method of rebutting the presumption was the use of effective screening mechanisms, the Sixth Circuit stated that "courts must be sensitive to the competing public policy interests of preserving client confidences and of permitting a party to retain counsel of his choice." Id. at 224. The court further noted that it saw "no reason why the consideration which led the American Bar Association to approve appropriate screening for former government attorneys should not apply in the case of private attorneys who change their association." Id. at 226.

The Board has determined that both the presumption that an attorney has acquired confidences from a former client or from his or her former firm's client and the presumption that the attorney has shared those confidences with the attorneys in his or her new firm are rebuttable.

The Board adopts the Seventh Circuit's three-step analysis, outlined in Schiessle v. Stephens, 717 F.2d at 420-21, concerning motions to disqualify counsel. That analysis requires a determination of

  1. whether a substantial relationship exists between the subject matter of the former and present representations.
  2. whether the presumption of shared confidences which arises from its determination that the representations are substantially related has been rebutted with respect to the former representation.
  3. whether the presumption of shared confidences has been rebutted with respect to the present representation.

The Board in Formal Ethics Opinion 86-F-104 has stated that in determining whether a substantial relationship exists between two legal matters, "the scope and subject matter of the
former and present representations must be examined. It must be determined whether the subsequent representation is adverse to the matters at issue in the previous relationship."

The comment to Rule 1.9 of the ABA Model Rules of Professional Conduct suggests that the "underlying question [in determining whether a substantial relationship exists] is whether the lawyer was so involved in the matter that the subject representation can be justly regarded as a changing of sides in he matter in question."

Screening mechanisms should be aimed at confining disqualification to the person who was involved in the substantially related matter and therefore infected with or tainted by privileged information which is the source of the ethical problem. Isolation of the infected person would allow the other lawyers and support personnel in the firm or office to assist in or conduct the questioned representation free from any taint of misuse of client confidences.

The Board approves the use of screening procedures as a viable method to avoid the imputed or vicarious disqualification provisions of DR 5-105(D). The Board has further determined that the disqualification rules and screening procedures are applicable to lawyer, law clerk, paralegal, and legal secretary. All questions as to the sufficiency of the screening process are factual issues to be resolved by "objective and verifiable evidence presented to the trial court" and determined "on a case-by-case basis."

Those factors which the Board approves as appropriate for consideration in determining whether "specific institutional screening mechanisms" have been implemented "to effectively insulate against any flow of confidential information from the quarantined [person]" to other members of his or her new firm include the following:

(1) the structural organization of the law firm or office involved,

(2) the likelihood of contact between the "infected" person and the specific attorneys and support personnel involved in the present representation,

(3) the existence of law firm or office rules which prevent the "infected" person

a) from access to relevant files or other information pertaining to the present litigation and

b) from sharing in the fees derived from such litigation.

Law firms or offices are not limited to only these factors since they may design or institute other procedures which would effectively reduce the potential for disclosure or use of confidences. At a minimum, screening mechanisms should prohibit discussion of sensitive matters, limit the circulation of sensitive documents, and restrict access to files. A strong office policy which includes a threat of sanctions for breaching the established screening mechanisms; measures to prevent the disqualified attorney from receiving any compensation attributable to the representation; and physical, organizational, and geographic separation are some, but not all, factors which may be considered in implementing screening procedures. In weighing any factors, the question to be asked is whether the screening mechanisms reduce to an acceptable level the potential for prejudicial misuse of client confidences.

The Board reiterates that protection of the client and client confidences is of the utmost importance. Protection of the image of the profession from "even the appearance of impropriety" (DR 9-101) is also vitally important. Therefore, the presence of the "infected" person and the potential conflicts should be fully disclosed to the client. Full disclosure will give the client the opportunity to seek other counsel or to consent to continued representation. This consent should be contingent upon screening procedures being in place and adequate, and the Board highly recommends that the consent be in writing.

To the extent that the prior opinions cited herein conflict with this opinion, they are overruled.

This 10th day of March, 1989.

ETHICS COMMITTEE:

Cecil D. Branstetter
Cornelia A. Clark
Jerry C. Colley

APPROVED AND ADOPTED BY THE BOARD