Even the Office of Lawyers Professional Responsibility sometimes gets mixed up about ethics authorities. In a recent admonition (reversed on appeal), OLPR charged violations of rules that did not apply to the facts as alleged and failed to take account of recent, applicable case law.
Several aspects of a recent discipline – reversed by a Lawyers Board panel - suggest that it is time for an update on Rule 1.9, “Duties to Former Clients.” A brief overview will frame the problems with the discipline.
There was no former client conflict rule until 1985, when Rule 1.9 was adopted. Protecting confidentiality was the main policy purpose for adopting Rule 1.9, with loyalty as a secondary purpose. Since 2005, amendments and case law have reduced the valuation of loyalty and further emphasized confidentiality as the primary Rule 1.9 value.
Rule 1.9(a) provides, “A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.” Rule 1.9(b) applies the same test where a lawyer in the firm has acquired confidential information.
In 2019, the Office of Lawyers Professional Responsibility (OLPR) issued a private admonition. The admonition alleged a Rule 1.9 violation in a lateral hire situation. An attorney (A) had represented a client (C) in her old firm. More than a year later, after A joined a new firm, a lawyer (L) in A’s new firm commenced litigation against C, on behalf of a bank (B). OLPR issued an admonition to L, alleging that the litigation against C was the same or substantially related as the matter on which A had represented C. L appealed, a Lawyers Board panel conducting a hearing, the parties filed briefs, and the panel reversed the admonition.
The admonition mistakenly charged that L violated Rule 1.9. However, Rule 1.9’s prohibitions apply directly only to lawyers in a firm that represented C, i.e. to A’s old firm. L moved to dismiss the Rule 1.9 charge. OLPR’s brief did not attempt to defend the charge.
To support the remaining charge of the admonition, OLPR’s brief relied heavily on what was once the leading Minnesota case on Rules 1.9 and 1.10. Lennartson v. Anoka-Hennepin Independent School District No. 11, 662 N.W.2d 125 (Minn. 2003).[i] With narrow exceptions, Rule 1.10 imputes conflicts throughout a law firm. However, rule amendments and newer case law have superseded Lennartson in important ways.
“The Same Matter” In Lennartson, a lateral attorney’s new firm was disqualified where the lateral, while at her old firm, had represented plaintiff in the very same case as her new firm represented defendant. There was no need to analyze whether the matters were “substantially related,” because they were indisputably the same.
Often Rule 1.9 issues arise when the first representation involves an attorney (A) representing a client (C) in a deal with B, and the second representation involves a lawsuit, more or less relating to the deal, against C by A’s firm, old or new. If the deal and the suit are “the same matter,” there is a conflict.[ii]
The term, “same matter” appears often in the Rules of Professional Conduct. In 2018, the Court interpreted “same matter,” under Rule 4.2, to hold that, “[I]n litigated matters, the ‘matter’ is synonymous with the ‘case.’ This interpretation is consistent with the use of ‘matter’ elsewhere in the Minnesota Rules of Professional Conduct, which oftentimes means the same as "case" or "controversy."[iii]
After this holding, it appears that a litigated case between C and B is not the “same matter” as the prior, related deal. Although OLPR’s 2019 admonition alleged the deal and litigation were “the same or substantially related,” OLPR’s brief did not attempt to defend the allegation that the deal and litigation were the “same.” A deal and a follow-on case are, however, often – but not always – substantially related.
Confidentiality and Comment 3 In 2005, after Lennartson, the comments to Rule 1.9 were substantially amended. Amended comment 3 emphasizes protection of a particular type of confidential information – that which the former lawyer is able to use with material adverse effect against the former client. Comment 3 provides, “Matters are ‘substantially related’ for purposes of this rule if they involve the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client’s position in the subsequent matter. . . .Information that has been disclosed to the public or to other parties adverse to the former client ordinarily will not be disqualifying. Information acquired in a prior representation may have been rendered obsolete by the passage of time, . . ..” The Court has cited comment 3 as authoritative.
Comment 3 did not appear out of the blue. The comment essentially codified positions taken in Restatement (Third) of the Law Governing Lawyers § 132 (2000). Three cases will illustrate the great importance of comment 3 for former client conflict analysis.
State v. 3M The leading former client conflict case is State of Minnesota v. 3M Company, 845 N.W.2d 808 (Minn. 2014). A district court order, affirmed by the Court of Appeals, disqualified Covington & Burling from representing the State in litigation with 3M, because Covington had formerly represented 3M on what the courts found to be a substantially related matter. Covington’s representations for and against 3M both involved uses of a chemical, FCs, manufactured by 3M.
The Supreme Court reversed and remanded, holding that the lower courts had failed to consider (1) whether 3M had waived the conflict and (2) “whether confidential information provided to the attorney in the prior representation subsequently has been disclosed to the public and whether that information has been rendered obsolete by the passage of time.” The remand required the district court to make particularized findings on these issues. The public disclosure possibility arose because 3M had voluntarily disclosed to the EPA and to the public a great deal of information regarding FCs. Passage of time was important because Covington’s information regarding FCs may have become obsolete over many years.
Discovery after remand disclosed that 3M waived the conflict. A senior 3M attorney spotted the conflict issue, consulted with 3M insiders, and reported that 3M had “[run] the traps on Covington and will not seek to disqualify the firm.” The 3M attorney concluded that Covington’s “FC work was remote in time and only tangentially related.”
Before 3M, affidavits, exhibits, and legal argument furnished the basis for deciding disqualification motions. However, the Court remand in 3M required more particularized information.
The 2019 Admonition A second application of comment 3 is found in the 2019 admonition referenced above. A represented C in negotiation of a loan forbearance agreement with a bank (B).[iv] C discharged A before finalizing the agreement. C retained new counsel, who finalized the agreement and, months later, negotiated a second forbearance agreement with B. C later filed bankruptcy. A joined the law firm of L. Over a year after A’s representation of C ended, L represented B in a foreclosure action against the property of C.
Under comment 3, the foreclosure was not the “same matter” as the forbearance agreement matter, because a litigation “matter” is restricted to the “case” itself. Whether the matters were “substantially related” is determinable by the information provisions of comment 3. In connection with the forbearance agreements, C broadly warranted disclosure of relevant financial information to B, the litigation adversary. In connection with the bankruptcy, the law broadly required public financial disclosures.
Two questions were central: Was there a “substantial risk” that there was a residue of financial facts that C had disclosed only to A? If so, were those facts likely to “materially advance” B’s position in the foreclosure? After 3M, general averments will not suffice to answer these questions.
L argued for negative answers to these questions. C’s disclosures and disclosure requirements were very broad. Over a year passed between termination of L’s representation and commencement of the foreclosure suit. A district court judge in a proceeding related to the foreclosure denied a motion to disqualify L’s firm. The order denying disqualification focused on limited, objective, public information - debt, default, and security. In addition, the District Ethics Committee recommended that OLPR dismiss C’s ethics complaint.
In its admonition appeal brief, OLPR cited Lennartson (2003) eight times, but did not cite 3M (2014) even once. The Board panel reversed the admonition, concluding that OLPR failed to prove its case.
Joint Representations, Later Dissolutions A third application of comment 3 is found in some business formation and spousal estate planning representations. One lawyer often jointly represents two clients. Joint clients normally share all information. Sometimes the clients later seek a dissolution. May one lawyer represent one former client against the other former client?
The traditional answer to this question was “no.” Whether there was a “substantial overlap” in subject matters determined whether there was a disqualifying “substantial relationship” of subject matters. However, since 2005, comment 3 has changed the basis for analysis by providing, “Information that has been disclosed to. . . parties adverse to the former client ordinarily will not be disqualifying.” A former client may well feel betrayed by having her former lawyer appear as her new adversary – and some lawyers will decline such representations for this reason – but the lawyer will not have an information advantage over new counsel.
The author represented two lawyers whom former clients accused of conflicts, for representing one spouse against another, after having represented the spouses jointly. In both cases, OLPR dismissed the complaint. OLPR’s dispositions of such cases are, however, not entirely predictable, because in one case, on facts similar to those which produced dismissals, a stipulated public reprimand was issued. [v] This inconsistency is another reason for a new, close look at Rule 1.9 and its comments.
[i] For a critical review of Lennartson, see William J. Wernz, Ethics Walls in Minnesota – Lennartson Revisited, Minn. Law., Aug. 4, 2003.
[ii] Rule 1.10(a) imputes Rule 1.9 conflicts to the firm, except in limited circumstances, identified in Rules 1.10(a) and (b). After Lennartson, Rule 1.10(b) was amended to permit (“may”) a very limited class of conflicted representations if there was proper screening and notice. Because Rule 1.10(b) no longer includes prohibitory language, an imputed conflict violates Rule 1.10(a), but not Rule 1.10(b).
[iii] In re Panel File No. 41755, 912 N.W.2d 224, 231 (Minn. 2018).
[iv] The Board panel received the author’s expert affidavit on respondent’s behalf into evidence in the admonition appeal.
[v] See William J. Wernz, Quandaries and Quagmires: When Joint Clients Split, What’s a
Lawyer to Do?, Minn. Law., Jan. 19 2017; Martin A. Cole, Summary of Admonitions, Bench & B. of Minn., Feb. 2010; Martin A. Cole, Top Ten List, Bench & B. of Minn., Aug. 2015.