Legal Ethics

This Month's Topic: State of Minnesota v. 3M, Former Client Disqualification Case

I. INTRODUCTION – OBSERVATIONS AND QUESTIONS
1. Overview The Supreme Court’s new opinion in the State v. 3M disqualification case answers two questions of first impression and raises several other questions that are important for conflict-based disqualification motions. State of Minnesota v. 3M Company, 2014 WL 1696180 (Minn. April 30, 2014). This blog makes observations and raises questions, but is not a full review of the case. Page references are to the Westlaw published opinion. “DQ” is used for “disqualification.”
2. Procedural History. The district court disqualified the Covington and Burling law firm from continuing to represent the State of Minnesota, as plaintiff, in a suit (“NRD”) claiming natural resource damages from 3M chemicals (FCs), in groundwater. The DQ was based on a Rule 1.9(a) (former client conflict) violation, because the NRD suit was found to be “substantially related” to Covington’s prior representation of 3M, for many years, on FCs related to food wrappings. The Court of Appeals affirmed the DQ and held that Covington did not have standing to appeal, though the State did have standing. The Supreme Court in small part affirmed, in small part reversed (finding Covington does have standing), and in large part remanded to the district court, for further findings and analysis on several conflict issues.
3. Disclaimer and Recognition. No position on the merits of 3M’s disqualification motion is intended in this article. The Supreme Court and lower courts have been confronted with a complex and difficult set of issues, that involve both important public policy issues and numerous factual issues. The courts have toiled long and admirably with these issues. Critical questions posed below are directed to general jurisprudence in ethics and disqualification matters, not to an outcome of 3M’s motion.
4. What Was Affirmed? The Supreme Court opinion states, at beginning and end, “Affirmed in part, . . .,” but the opinion does not expressly state what is affirmed. The word “affirm” does not otherwise appear in the opinion, except in reference to the Court of Appeals holding. It appears the court affirmed its own prior holding, and that of the Court of Appeals, that “equities” are not to be considered in DQ motions. This subject is discussed below.
5. Facts and Stakes. The facts of this matter will not be stated here. They are found in the case. Three facts are worth repeating. First, the State, through Covington, commenced suit against 3M in January 2011. 3M objected to the representation in March 2012 and filed its DQ motion on April 30, 2012. The claim, by Covington and the State, that 3M unduly delayed its conflict claims, is important to the court’s holding. Second, before being disqualified by the district court, in October 2012, “Covington devoted more than 20,000 hours of attorney time to the NRD case and incurred between $2 million and $3 million in litigation expenses.” Third, 3M’s DQ motion was filed two years to the day before the Supreme Court ruling. After remand, and possible further appellate proceedings if DQ is granted, a great deal of time will have been devoted to litigating the DQ issues.
6. Substantial Relationship and Other Relevant Circumstances. Rule 1.9(a) is largely based on whether a lawyer’s current representation adverse to a client is “substantially related” to the lawyer’s prior work for the same client. The trial and appellate courts appear to agree that Covington’s work for 3M and Covington’s work against 3M are in one sense substantially related – the two representations significantly overlap. However, the Supreme Court has directed further review of “other relevant circumstances.” *6. Among these circumstances are the possibilities that the confidential 3M information Covington has would not “materially advance” the State’s position in the NRD suit, for such reasons as that the information has been “disclosed” or has become “obsolete.” Rule 1.9 cmt. 3. Remand was also ordered to determine whether 3M impliedly waived any conflict, by unreasonably delaying its DQ motion.
7. Ethics Summit IV. If you have more interest in this case, sign up for the May 28 Minnesota Legal Ethics Summit IV, sponsored by MCLE. Ken Jorgensen, Charles Lundberg, Judith Rush and I will discuss the case, with Eric Cooperstein moderating.
II. TWO FIRST IMPRESSION RULINGS
1. Lawyers’ Standing to Appeal. “Whether a disqualified attorney has standing—independent of the attorney’s client—to appeal from a disqualification order is an issue of first impression for us.” *4. The court followed the majority of other jurisdictions in finding such standing. The court explained, “An attorney who is disqualified based on a finding that the attorney has committed professional misconduct likewise has a significant and distinct reputational interest at stake warranting defense and, therefore, should be permitted to appeal. Accordingly, an attorney has standing to appeal, independent of the attorney’s client, when a district court finds that the attorney violated the rules of professional conduct and disqualifies the attorney from the representation.” *5. This standing issue is not very important in 3M, because the State appealed, but it could be important in other DQ and sanctions cases, where lawyers and clients have different interests regarding appeal.
2. Clients’ Right to Waive a Rule 1.9(a) (Former Client Conflict) Violation. “We next consider another issue of first impression—namely, whether a party can waive its right to seek disqualification of opposing counsel for a Rule 1.9(a) conflict. Under our waiver jurisprudence, any legal right may be waived, except as limited by public policy. State ex rel. Shelby v. Rigg, 255 Minn. 356, 365, 96 N.W.2d 886, 893 (1959).” The court fairly quickly concluded, “We conclude that the right to seek disqualification of opposing counsel can be waived. Our conclusion is consistent with the majority of courts that have considered this issue.” *7. A clarification is needed here. Clients have always been able to “waive” Rule 1.9 conflicts, but instead of “waiver,” the rules use the term “informed consent.” “Informed consent” is, however, defined much more narrowly than “waiver,” when, as in 3M, waiver implied by conduct is included. In 3M, the court held for the first time that a party can waive conflicts by delay. Several Minnesota federal cases take this position.
3. Roles of the Rules and Common Law. Rule 1.9(a) provides a client may give “informed consent” to the conflict of its former counsel. In affirming DQ, the Court of Appeals emphasized informed consent, finding that – however 3M may have delayed in bringing a DQ motion – 3M did not affirmatively give informed consent. The Supreme Court, however, paid no attention to informed consent, instead fastening on the far broader civil law doctrine of “implied waiver” – a concept that does not appear in the rules. On the other hand, when the Supreme Court rejected the State’s argument that equities weighed against DQ, the court insisted that the four corners of Rule 1.9 controlled. It is not clear why the court’s Rule 1.9 DQ jurisprudence allows one common law doctrine (waiver) but does not allow another common law doctrine (equities).
III. ISSUES REMANDED TO DISTRICT COURT
1. Three Waiver Issues. The district court was directed to consider three waiver issues. Did 3M waive confidentiality or DQ of Covington.
1. Waiver by Agreement? By disclosing confidential information to the State by agreement? In 2007 3M agreed to broad disclosure of documents related to its use of PFCs, except for privileged and work product-protected documents.
2. Waiver by Suit? By putting confidential information at issue by suing Covington for breach of fiduciary duty, in a separate district court action? The doctrine that a client generally waives confidentiality when it sues its attorney is well-established, and Rule 1.6(b)(8) allows lawyers to disclose confidential information to defend such claims. However, 3M argues that its civil claims are narrow and carefully-crafted to avoid confidentiality issues and thereby avoid waiver. Although the court gave only brief attention to this issue, it has the potential to be important or even decisive.
3. Waiver by Delay? Most importantly, by delay in objecting to Covington’s representation and in moving for DQ? In answering this question, the lower court must determine and consider whether and when 3M employees and agents, high and low, had knowledge relevant to the conflict.
2. Two or Three More Confidentiality Issues. The district court was also directed to consider whether any remaining confidential information was not disqualifying, for reasons stated in Rule 1.9 comment 3:
1. There is not a substantial risk that the information would materially advance the State’s position; or
2. The information has become obsolete.
3. The information has become public. (This confidentiality loss arises from the waiver-by-agreement or waiver-by-suit issues discussed above.)
IV. WHY DOES A RULE 1.9(a) VIOLATION MANDATE DISQUALIFICATION?
1. Holding. The court stated, simply and firmly, “If the district court finds a violation of Rule 1.9(a), the offending attorney must be disqualified from the case, unless the moving party is otherwise barred—for example, by lack of standing, or by express or implied waiver—from seeking opposing counsel’s disqualification.” *10. Why ”must” DQ follow from a violation? The court emphasized that “the rule dictates” this result, by using the words “shall not.” Id.
2. Rule Violation Does/Does Not Mandate DQ. Before Lennartson v. Anoka-Hennepin Independent School District No. 11 662 N.W.2d 125, 132-35 (Minn. 2003), the Rules of Professional Conduct and the prior Code of Professional Conduct had numerous “shall not’s,” but the court had not held that any violation mandated DQ, or any other particular consequence. In 2005, the court amended the SCOPE section of the rules, to state, “[V]iolation of a rule does not necessarily warrant any other nondisciplinary remedy, such as disqualification of a lawyer in pending litigation.” SCOPE [20]. The court’s 3M opinion itself cites the SCOPE section of the rules for guidance. *9. In Lennartson and 3M, the court has held that rule violation does necessarily warrant DQ, unless there is waiver or the like.
3. Trump and No Trump. The rules use “shall,” “shall not,” “may,” and the like, to require, forbid or permit certain conduct. As the court noted, “The rules clearly direct that the text of the rules governs attorney conduct.” *9. The court likewise noted, “It is this rule [1.9(a)] that governs.” Id. However, the court fails to note that the rules themselves say nothing about consequences of violation. Put differently, the rules govern conduct but do not govern consequences. There is no inconsistency between SCOPE and rule, when the latter forbids conduct and the former declares that no specific consequence is attached, in discipline or disqualification, to a rule violation. The rules trump the comments and the rules would trump the SCOPE section, but only if the rules and SCOPE were at odds. They are not.
4. Rule Violation Does Not Mandate Discipline. “The rules are designed to provide guidance to lawyers and to provide a structure for regulating conduct through disciplinary agencies.” SCOPE [20]. The Supreme Court has explained that a rule violation does not necessarily entail discipline, “[T]he rules presuppose that whether discipline should be imposed for a violation, and the severity of a sanction, depend on all the circumstances, such as the willfulness and seriousness of the violation, extenuating factors and whether there have been previous violations.” R. Prof. Con. SCOPE [19].” Likewise, the Office of Lawyers Professional Responsibility (OLPR) does not discipline every rule violation. “A determination that discipline is not warranted may be issued upon the Director’s conclusion that such resolution is appropriate. Rule 8(d)(1), RLPR. * * *Nothing in the rules requires the Director to issue discipline whenever misconduct is established.” Minnesota Legal Ethics, May 2012 blog.
5. Isolated and Non-Serious Violations. The Supreme Court has also prescribed that some rule violations are to be disciplined by private admonitions, when the violations are found to be isolated and “non-serious.” Rule 8(d)(2), R. Law. Prof. Resp. OLPR has reported numerous admonitions for Rule 1.9 violations. Should such non-serious rule violations automatically result in serious, even catastrophic, DQ orders?
6. Discipline/DQ. In the discipline world, Rule 1.9 violations may result in no discipline, or in private admonition, or in public discipline, depending on “all the circumstances,” especially the severity of the violation. On what basis should it be said that all Rule 1.9 violations must result in DQs, except for a single circumstance – the client waiving its rights? How would public confidence in the judiciary be fostered if, say, a minor Rule violation, with extenuating circumstances, resulted in no discipline, but in a major DQ?
V. HOW SHOULD LAWYERS AND JUDGES REGARD THE COMMENTS TO THE RULES? SHOULD THE SUPREME COURT CHANGE ITS POSITION?
1. Rule 1.9 Comment 3. In State v. 3M, the court found the district court’s assessment and analysis wanting, in part because the district court did not consider the confidentiality issues identified in Rule 1.9 cmt. 3. The court explained that, although the comments to the rules “ordinarily are not binding on us,” nonetheless “historical reliance on the comments to Rule 1.9” dictates consideration of comment 3. *10, n. 3. The Rule 1.9 comments are, however, far from the only comments on which the court has relied.
2. The Problem. As explained below, the status of individual comments remains unclear, because the court has rejected the comments en bloc, but has frequently used some individual comments, in a variety of ways. Trial courts and lawyers do not know whether most individual comments may be ignored, or may be used for guidance, or may actually create substantive rights and duties. Learning the correct status of a comment only via remand or via a disciplinary opinion leaves lawyers and judges without reliable guidance.
3. The Court Has Repeatedly Refused to Adopt or Amend the Comments. By a June 30, 2005 order, the court stated, as to the comments to the Rules of Professional Conduct, “the inclusion of comments is made for convenience and does not reflect court approval of the comments made therein.” The court previously rejected the comments by orders dated December 11, 1995, January 4, 1988 (and on reconsideration, January 29, 1988). In 1988, the court explained, “this court takes the view that unless specifically adopted by this court, any comments to the rules are those of the committee or organization submitting them in conjunction with a proposed rule or amendment.” Which of the many comments cited by the court have been “specifically adopted?”
4. The Court Has Drafted and Adopted Some Comments. When the Minnesota Supreme Court first adopted the Rules of Professional Conduct, in 1985, the court, on its own initiative, drafted short portions of comments to Rules 1.2 and 1.5. The court also provided all the comments to Rule 1.6, because the court rejected ABA Model Rule 1.6 and instead carried forward Minnesota DR 4-101 from the prior Code of Professional Responsibility. However, in later years, the comments to these rules (at least as published in the Rules of Court Book) have changed, as have the rules. The court’s orders adopting various rule amendments state the comments are included “for convenience and does not reflect court approval of the comments made herein.” Is there any version of the comments to Rules 1.2, 1.5 and 1.6 that should be regarded as “specifically adopted?” For example, are the 1985 comments to Rule 1.6, drafted and adopted by the court itself, still somehow in effect, even though the text of Rule 1.6 has been amended more than once since 1985?
5. The Court Adopted Similar Comments to the Judicial Code. In 2009, when the court extensively amended the Code of Judicial Conduct, it expressly adopted the comments to the Code en bloc. The Code comments and Rules comments both provide “guidance.” Both derive from ABA Models. There is no apparent reason for the court to have adopted one set of comments and rejected the other.
6. The Court Frequently Uses the Comments. Notwithstanding its declination to adopt the comments, even as guides, the court, both before and after 2005, has cited the comments. These citations usually regard the comments as guides to interpretation, but sometimes regard the comments as part of the Rules. For example, the court stated, “the comments to MRPC 4.2 establish that this relationship [general manager] falls within the protection of the Rule.” State v. Miller, 600 N.W.2d 457, 467 (Minn. 1999) (emphasis added). A comment that can “establish” the meaning of a Rule is more than a guideline. Similarly, in State v. Clark, 738 N.W.2d 316 (Minn. 2007), the court explained its application of Rule 4.2 to particular facts by stating, “The comments following Rule 4.2 provide examples of communications authorized by law . . . .” Id. Fn 3. There are numerous other examples of the court citing the comments after 2005. MINN. LEGAL ETHICS, Interpreting and Applying the Rules and Other Authorities § VII.D. These examples are not a complete list of citations of the comments. Which of the cited comments, if any, have been “specifically adopted?” Does the court or OLPR or anyone have an authoritative list of adopted comments?
7. The Court Amended Rule 3.3 by Adopting a Comment – In re Albrecht, 2014 WL 1385354, (Minn. Apr 09, 2014).
1. A very recent case shows how freely and consequentially the Supreme Court uses the comments. OLPR alleged that Albrecht violated numerous rules, including 3.3(a)(1) and 4.1, “by lying to or misleading the referee and the Director. . .” The referee found these allegations to be supported and Albrecht challenged the referee’s conclusions.
2. Rule 3.3 (“Candor Toward the Tribunal”) begins, “A lawyer shall not knowingly. . ..” Rule 3.3 on its face applies equally to lawyers representing clients, to lawyers appearing pro se, and to lawyers appearing as witnesses. Albrecht’s Rule 3.3 challenge, however, invoked a comment to Rule 3.3 referring to a lawyer “representing a client.” Rule 3.3 cmt. 1. Agreeing with Albrecht, the court held, “Because Albrecht was not representing a client when he made the statements, we agree that he did not violate Rules 3.3 or 4.1.”
3. The Supreme Court held – on the basis of a comment – that Rule 3.3 does not apply to pro se lawyers. The court reversed the referee’s conclusion that Albrecht’s lies to the discipline referee violated Rule 3.3. The court explained, “According to Minn. R. Prof. Conduct 3.3 cmt. 1, ‘[t]his Rule governs the conduct of a lawyer who is representing a client in the proceedings of a tribunal.’”
4. In Albrecht, the court effectively found that a comment could amend a rule, by adding a “representing a client” requirement where the rule says nothing of the sort.
8. Jurisprudence.
1. Not Adopted/Frequently Used. OLPR openly states that it relies on the comments, for advisory opinions, for discipline, and for exculpation. The court categorically states that it does not adopt the comments en bloc, but only by specific action. However, it is unclear which of the comments have been specifically adopted.
2. Questions. The Supreme Court’s categorical rejection of the comments, combined with its ad hoc but generally ill-defined embrace of some comments, creates several questions.
1. Should lower courts use the comments? If so, should all comments be used, or only those which the court has specifically adopted?
2. If the comments are used, should they be regarded only as guides, or as sources that can “establish” obligations or amend rules?If the comments are used, should they be regarded only as guides, or as sources that can “establish” obligations or amend rules?
3. Is it efficient to tell lower courts the comments have not been adopted, then hold that, on the basis of failure to consider comments, the lower court has erred?
4. May lawyers rely on the comments?
5. Conversely, are lawyers subject to discipline or DQ for violations or rule interpretations that are found only in the comments?
9. Relief?
1. Petition. The Lawyers Board and the MSBA will soon file a petition with the Supreme Court, to amend the Rules of Professional Conduct. The proposed amendments are based largely on amendments to Model Rules. But most Model Rules amendments were to the comments.
2. “Therein Lies a Problem.” As OLPR succinctly said, “Therein lies a problem.” Patrick R. Burns, Changes Mulled for Rules of Conduct, MINN. LAW., Feb. 3, 2014. The court has previously ruled it cannot amend comments that it never adopted. The Board and the MSBA contemplate asking the court to “at least acknowledge the changes in the comments.” But what kind of jurisprudence merely “acknowledges” what the court later may hold – for retroactive application – establishes the law or offers authoritative guidance?
3. Sua Sponte. In my opinion, the Minnesota Supreme Court should, in ruling on the Board/MSBA petition, clarify the status of the comments. All but a handful of other jurisdictions have adopted the comments. A website provides more information on other jurisdictions’ positions. http://www.americanbar.org/content/dam/aba/migrated/cpr/pic/comments.authcheckdam.pdf
4. A Second Problem. Unfortunately, the comments have not been drafted as carefully as the rules were drafted. There are a number of comments that, like Rule 3.3 cmt. 1, would add to, subtract from or just make uncertain, the related rule. The court should appoint a committee to revise the comments for the court’s adoption.
VI. ARE EQUITIES BY ANY OTHER NAME AS SWEET?
1. Shakespeare. “What’s in a name? That which we call a rose / By any other name would smell as sweet.” Romeo & Juliet, Act II, Sc. 2. In the law, however, names matter. “Equities” is a more capacious category than “implied waiver.”
2. Laches. The Minnesota Supreme Court generally applies the equitable doctrine of laches. “Laches is an equitable doctrine that “prevent[s] one who has not been diligent in asserting a known right from recovering at the expense of one who has been prejudiced by the delay.” Winters v. Kiffmeyer, 650 N.W.2d 167, 169 (Minn.2002).” Carlson v. Ritchie, 830 N.W.2d 887, 891 (Minn. 2013). Some courts speak of “delay or laches” as synonymous. EZ Paintr Corp. v. Padco, Inc. 1983 WL 423 (D. Minn.), 746 F.2d 1459, 1463 (Fed.Cir.1984).
3. “Equities” or “Implied Waiver?” In 3M, the court stated, “We do not countenance the strategic use of disqualification motions to delay judicial proceedings to gain an advantage in litigation.” *7. This statement, standing alone, could well sound in equity, as laches. The statement would also fit the category “implied waiver.” The problem is not in using waiver, but rather in rejecting equities.
4. A Problem With Equities? Perhaps the court finds “equities” too broad a category. The court itself once referred to equitable consideration in DQ cases as a matter of “general fairness.” Jenson v. Touche Ross, 335 N.W.2d 720, 730-1 (Minn. 1983). Overbreadth may lead to unpredictability in DQ matters. But the court could prevent overbreadth by identifying the kinds of equities it would consider appropriate.
5. Problems Without Equities? A Scenario. To illustrate how abandoning equities in DQ jurisprudence is problematic, suppose the following facts.
1. A lawyer violates a conflict rule more or less innocently, e.g. through a data entry failure of a subordinate.
2. The conflict comes to light – for both lawyer and adverse party – in the middle of a lengthy civil jury trial. The star witness died not long after her testimony.
3. Confidential information does not appear imperiled. This is because the conflict is merely formal, under Rule 1.7(a)(1). Even in Rule 1.9 matters, danger to confidentiality could be very limited for strong factual reasons, e.g., the lawyer with disqualifying information has been on leave for the relevant period and the conflict identification error has prevented anyone from matching the old and new representations.
6. Problems Without Equities? Analysis In State v. 3M, if there is no waiver, there could be DQ only if the relevant information had become public, or obsolete, or not very useful. But violation of some conflict rules, e.g. 1.7(a)(1), often occurs without any informational component. Under 3M, DQ nonetheless would nonetheless appear to be mandated, as a result of rule violation, without regard to consequences that parties and the administration of justice may suffer.
7. The Public’s Trust. Lennartson and 3M are grounded in concern for ”the public’s trust in attorneys and the judiciary.” *7. In the scenario above, will public trust be fostered by ruling that even an innocent, formal rule violation requires a mistrial? Why does public trust permit disciplinary exculpation (in “all the circumstances”) of a lawyer who violated a rule but require (absent waiver) DQ (with few or none of the circumstances taken into account)? The public is arguably more likely to trust a system that takes account of important circumstances than one that inflexibly mandates harsh consequences for innocent or petty violations.