Keeping Confidences When A Lawyer Changes Firms
One of our most frequently asked questions at TLIE concerns potential conflict issues with lateral hires. When a lawyer moves from one law firm to another, the lawyer is required to keep confidences learned at the prior firm. Texas law has been at odds with other states and decisions in federal courts by not permitting screening of lateral hire lawyers in most circumstances. This article will provide some resources and suggestions for avoiding disqualification, ethical and malpractice problems associated with the confidences lateral hires must keep.
The heart of the ethical concern is expressed in Texas Rule 1.09. Under subsection (a), a lawyer who personally represented a client in a matter is not permitted to represent someone adverse to a former client under three circumstances:
- If the validity of the lawyer’s services or work product is at issue,
- If confidences of the prior client under Rule 1.05 “in reasonable probability” will be violated, or
- If the “the matters are the same or substantially related.”
This potential bar to representation is exacerbated by imputed knowledge. Lawyers at the new firm cannot represent a client if the lateral hire would not be permitted to do so under 1.09(b).
It should be noted that the client of the old firm can consent to representation by the new firm that is adverse to the client under Rule 1.09(a), and client consent is not required in certain cases involving successive government and private employment under Rule 1.10.
Rule 1.09 only addresses representation by a lateral hire lawyer, or his or her new firm associates, of clients adverse to those the lateral hire lawyer personally represented at the prior firm. However, Rule 1.06(b) and Rule 1.05 further limit who a lateral hire lawyer may represent. The lateral hire lawyer may not share confidences of a client gained while at the old firm even if the lawyer did not personally represent that client. The lawyer’s knowledge of confidences from an old firm is imputed to lawyers at the new firm under Rule 1.06(f), disqualifying the entire firm.
In most US jurisdictions, lateral hires can be screened from participation in cases at a new firm that would otherwise run afoul of Rule 1.09 and 1.06. Texas case law has not allowed screening as a cure of Rule 1.06 and 1.09 for lawyers, although it does permit screening for non-lawyer personnel at law firms and in situations where lawyers worked as a clerk prior to joining a law firm. The law clerk scenario was recently addressed by a Texas Supreme Court order in March of 2016 which added Comment 19 to Rule 1.06 and amended Comment 5 to Rule 1.09. Texas Ethics Opinion 644, revised in July of 2016 in light of the March order, provides a good summary of Texas state case law with regard to the effectiveness of screening of all firm personnel.
The bottom line is that a laterally hired lawyer who personally represented or learned confidences about a client at his prior firm may face disqualification or disciplinary action if his new firm represents a client who is adverse to the client of the lateral hire’s former firm.. Non-lawyers who change firms, or non-lawyers who become lawyers and change firms, need to be screened from cases on which they worked or received confidences at prior firms.
A recent Texas Supreme Court case, In Re National Lloyds, is poised to address whether a lateral hire lawyer who did not receive confidences at the old firm is disqualified or under any obligation to act to screen themselves from cases adverse to a client at the prior law firm. In that case, a client of a law firm tried to disqualify an opposing law firm and a laterally hired lawyer. The laterally hired lawyer never worked on the case at the old firm and never received any confidential information about the case. The court of appeals and trial court both struck the attempt to disqualify the firm and the lateral, but the Supreme Court case is pending.
While screening of lateral hires may not be effective to carry out ethical obligations in all situations, former client consent to screening may be possible. Also, a thorough screening process with client consent may limit malpractice exposure because the lawyer or firm could demonstrate lack of actual damages from any revelation of confidences. It should also be noted in analyzing confidentiality in lateral hire situations that the reasonable belief of a lawyer, when that is a factor, may be judged in hindsight by an objective standard using expert testimony.
