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Lawyyyer Mobility in the Context of Corporate Departments

Presented by:

William H. Roberts, Blank Rome LLP

Jeremy A. Rist, Blank Rome LLP

Kevin M. Passerini, Blank Rome LLP

@BlankRomeLLP #EmergingIssues7 I. Do need to anticipate ethical issues arising from lawyer mobilitbility? ? II. Could an entire depqpartment be disqualified?

@BlankRomeLLP #EmergingIssues7 I. Lawyer Mobility: The Context

Do ethical rules pertaining to lawyers moving from one law firm to another law firm also apply to corporate law departments?

@BlankRomeLLP #EmergingIssues7 Rule Basics—NY RPC 1.9: Duties to Former Clients • “(a) 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.”

• “(b) Unless the former client gives informed consent, confirmed in writing, a lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which formerly was associated had previously represented a client: (1) whose interests are materially adverse to that person; and (2) about whom the lawyer had acquired information protected by Rules 1.6 or paragraph (c) of this Rule that is material to the matter.”

@BlankRomeLLP #EmergingIssues7 Rule Basics—NY RPC 1.9: Duties to Former Clients (continued)

• “(c) A l aw yer who has f orm erl y r epr esent ed a cli ent in a m att er or wh ose present or former firm has formerly represented a client in a matter shall not thereafter: (1) use confidential information of the former client protected by Rule 1.6 to the disadvantage of the formerformer client except as these Rules would permit or require with respect to a current client or when the information has become generally known; or (2) reveal confidential information of the former client protectedprotected by Rule 1. 6 except as these Rules would permit or require with respect to a current client.”

@BlankRomeLLP #EmergingIssues7 Rule Basics—NY RPC 1.10: Imputation of Conflicts of Interest • “(a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them ppgracticing alone would be prohibited from doin gyg so by Rule 1.7, 1.8 or 1.9, except as otherwise provided therein.”

• “(c) When a lawyer becomes associated with a firm, the firm may not knowingly represent a client in a matter that is the same as or substantially related to a matter in which the newly associated lawyer, or a firm with which that lawyer was associated, formerly represented a client whose interests are materially adverse to the prospective or current client unless the newly associated lawyer did not acquire any information protected by Rule 1.6 or Rule 1.9(c) that is material to the current matter.”

• “(d) A disqualification prescribed by this Rule may be waived by the affected client or former client under the conditions stated in Rule 1.7 [(i.e., informed consent, confirmed in writing)]. ”

@BlankRomeLLP #EmergingIssues7 But how do these conflicts rules apply in the context of corporate law departments?

@BlankRomeLLP #EmergingIssues7 Corporate Law Departments and The Rules

• New York’s rules expressly include corporate law departments : – NY RPC 1.0(()h) defines “firm" or "law firm“ as “includ[ing], but…not limited to, a lawyer or lawyers in a law partnership, professional , sole proprietorship or other association authorized to practice law; or lawyers employed in a qualified legal assistance organization, a law office, or the legal department of a corporation or other organization.” • And New York is not alone: – See, e.g., PA RPC 1.0(c) (defining a “firm" or "law firm" as “a lawyer or lawyers in a law partnership, professional corporation, sole proprietorship or other association authorized to practice law; or lawyers employed in a legal services organization or the legal department of a corporation or other organization.”)

@BlankRomeLLP #EmergingIssues7 Lawyer Mobility: How the Conflicts Rules Apply in the Traditional Law Firm Context • Case #1: Lawyer Moving from Law Firm to Law Firm – CflitConflicts analylisis • Restrict information to the conflict checking staff and the General ’s office • Conflicts checks on the potential new clients • Collect information from the lateral and run searches to determine whether the lateral has any material information about the other side of matter the law firm is handling – Written consent required in NY • But notice and screening permitted in many other in the absence of consent – Get read to comply with Rule 1.10

@BlankRomeLLP #EmergingIssues7 Lawyer Mobility: How the Conflicts Rules Apply in the Traditional Law Firm Context

• Case #2: Moving from Public to a Law Firm

– NY RPC 1.11: Special rule regarding former government lawyers that permits screening: “(a) Except as law may otherwise expressly provide, a lawyer who has formerly served as a public officer or employee of the government: (1) shall comply with Rule 1.9(c); and (2) shall not represent a client in connection with a matter in which the lawyer participated personally and substantially as a public officer or employee, unless the appropriate government agency gives its informed consent, confirmed in writing, to the representation.”

@BlankRomeLLP #EmergingIssues7 Lawyer Mobility: Applying the Conflicts Rules in the Traditional Law Firm Context • Case #2 (continued): “(b) When a lawyer is disqualified from representation under paragraph (a), no lawyer in a firm with which that lawyer is associated may knowingly undertake or continue representation in such a matter unless: (1) the firm ac ts promp tly an d reasona bly to: (i) notify, as appropriate, lawyers and non-lawyer personnel within the firm that the personally disqualified lawyer is prohibited from participating in the representation of the current client; (ii) implement effective screening procedures to prevent the flow of information about the matter... (iii) …the disqualified lawyer is apportioned no part of the fee…; and (iv) given written notice to the appropriate government agency…; and (2) there are no other circumstances in the particular representation that create an appearance of impropriety.”

@BlankRomeLLP #EmergingIssues7 Lawyer Mobility: How the Conflicts Rules Apply in the Traditional Law Firm Context

• Case #2 (continued): “(c) … As used in this Rule, the term ‘confidential government information’ means information that has been obtained under governmental authority and that, at the time this Rule is applied , the government is prohibited b y law from disclosing to the public or has a legal privilege not to disclose, and that is not otherwise available to the public. A firm with which that lawyer is associated may undertake or continue representation in the matter only if the disqualified lawyer is screened from any participation in the matter in accordance with the provisions of paragraph (b).”

@BlankRomeLLP #EmergingIssues7 What Lawyer Mobility Ethics Compliance Presupposes • Key rules: – 1.9 (duties to former clients) – 1.10 (imputation of conflicts of interest) • Conflicts databases listing all existing and former clients and adverse parties in all matters • Staff trained to analyze the results of conflicts searches • Lawyers assigned to apply the applicable ethical rules to the facts of each case and to resolve conflicts through consents or, in the case of former government lawyers, screens and notices • IttiImputation priilinciples

@BlankRomeLLP #EmergingIssues7 Parallel Scenarios for the In-House Lawyer or Corporate Law Department

• Lawyyger moving from one cor porate law de partment to another corporate law department: Rule 1.10, Rule 1.9 • Lawyer moving from practice to a corporate law department: Rule 1.10, Rule 1.9 • Lawyer moving from a corporate law department to a private law firm: Rule 1.10, Rule 1.9 • Lawyer moving from public service to a corporate law department: RlRule 1111.11 • Lawyer moving from a corporate law department to public service: Rul e 1110.10, 191.9

@BlankRomeLLP #EmergingIssues7 How Can Corporate Law Departments Vet Lateral Lawyers under the Conflicts Rules? • Parallels with law firm practice • BIG DIFFERENCE – With corporate law departments, there is only one new client – Caveats: • What about the members of the corporate family? • What about when there is a corporate restructuring, merger, acquisition, or other transaction? • Other issues remain

@BlankRomeLLP #EmergingIssues7 What Compliance by a Corporate Law Department Presupposes • As New York’s Rules define “law firm” and “firm,” Rule 1.10 applies to corporate law departments (see also NY RPC 1.10 , Comment 1) • NY RPC 1.10(e) also adds a “ written record” requirement: “A law firm shall make a written record of its engagements, at or near the time of each new engggagement , and shall imppylement and maintain a system by which proposed engagements are checked against current and previous engagements when…(3) the firm hires or associates with another lawyer; or (4) an additional party is named or appears in a pending matter.” • Although mandatory in New York, a “written record” may be required under other states’ Rules, too (see, ege.g., PA RPC 1. 7 & Comment 3 (“reasonable procedures”)) @BlankRomeLLP #EmergingIssues7 But what if there is no actual conflict?

• Because they fall within the Rules, corporate law departments still must keep abreast of potential conflicts • And New York’s “written record” requirement applies regardless of whether there is an actual conflict and may constitute a standalone violation: – NY RPC 1.10( f) : “Substa nt ia l fa ilu re to keep r ecor ds or to im pl em en t or maintain a conflict-checking system that complies with paragraph (e) shall be a violation thereof regardless of whether there is another violation of these rules.”

@BlankRomeLLP #EmergingIssues7 What “Written Record of Its Engagements” is Reqqpuired for Corporate Law Dep artment Compliance? • Possibilities: – A listing of the identities of current adverse parties in all transactional and litigation matters – A listing including similar information for the corporate family

@BlankRomeLLP #EmergingIssues7 Compliance Problems

• Consent Jurisdictions such as New York: – Wha t if the lat eral lawyer has al ready d resig ined wh en it devel ops that a consent is required? • Does the term “its engagements” mean a record of the corporation’s “adverse parties”? • Does it mean only current “adverse parties,” or could historically adverse parties also be relevant?

@BlankRomeLLP #EmergingIssues7 What Conflict-Checking, If Any, Should Corporate Law Departments Consider?

• Process to vet incoming lateral lawyers using a database of matters and adverse parties the company maintains on an ongoing basis – If parties are added in litigation or in negotiations, do you need to re-run the conflicts analysis?

@BlankRomeLLP #EmergingIssues7 What Conflict-Checking, If Any, Should Corporate Law Departments Consider?

• Request information from lateral lawyer candidates • Consents – Screening for public agencies • Back to the “written record”: – What kind of record-keeping must a corporate law department have in order to comply with the Rules? – Is it even practical for your company? • Caution: – What about the corporate family? – And what happens when there’ s a corporate restructuring, merger, acquisition, or other commercial transaction ?

@BlankRomeLLP #EmergingIssues7 Corporate Law Department Scenarios

• Lateral lawyers coming from a corporate law department: – Request information from lateral lawyer sufficient to determine whether the former employer is adverse in any current matters, the nature of the lateral lawyer’s involvement in the matters, and whether the lat eral lawyer has any "mat eri al inf ormati on” ab out the ma tters • Lateral lawyers coming from a law firm: – Request information from lateral lawyer sufficient to determine the nature of the lateral lawyer’s involvement in any currently adverse matters and whether the lateral lawyer has “material information” relating to any currently adverse matters by reason of the lateral lawyer’s involvement or the firm's representation of the adverse party

@BlankRomeLLP #EmergingIssues7 International Contexts

• What if myyp law department is international in sco pe and there is no counterpart in or Asia to the , but there is still sensitivity to misuse of confidential information? – Since the RPC 1.10 requirements are also for the purpose of protecting material confidential information, a central concern of foreign lawyer ethics (UK, Hong Kong, et al.), anticipate that there may be an issue under foreign lawyer ethics rules.

@BlankRomeLLP #EmergingIssues7 Analyzing Scenarios in the Context of Corporate Law Departments • Case #1: The former in-house counsel of a competitor of the corporation is joining your law department – Vetting for conflicts under Rule 1.10 – Should you obtain consent? • What if consent cannot be obtained, and the lateral resigned already? – Could a lateral lawyer’s contractual non-disclosure obligations limit the disclosures necessary for your company to conduct a conflicts analysis? • Example: The potential lateral candidate’s employer is preparing a against your company and the candidate has been involved – Implications under Rule 1.9(c)

@BlankRomeLLP #EmergingIssues7 Analyzing Scenarios in the Context of Corporate Law Departments

• Case #2: Your assistant ggjgpeneral counsel is joining a private law firm that represents or may, in the future, represent parties adverse to your company – If there is currently adversity, has the firm obtained your company’s consent? • If the law firm requests your company’s consent, should consent be provided? On what conditions? And what about the scope of the consent? – If there is only the potential for future adversity, how would you know when adversity arose, and would you know soon enough?

@BlankRomeLLP #EmergingIssues7 Analyzing Scenarios in the Context of CtCorporate Law DDttepartments

• Case #3: Rather than joining a law firm, your assistant general counsel jjpoins the law department of a com py,pany that is or, in the future, may be on the other side of commercial transactions or litigation involving your company – Still have concerns under Rule 1.9(c) – Parallels with Case #2

@BlankRomeLLP #EmergingIssues7 What Are the Potential Remedies for Non- Compliance?

• Discipline • Suits by former clients (or employers) against the lawyer for breach of the duties of confidentiality and for breach of dt/duty/ma lprac tice – Suits against the corporate employer of the lateral lawyer for aiding and abetting breach of fiduciary duty or tortious interference? • Disqualification of a law department? – How would disqualification actually play out?

@BlankRomeLLP #EmergingIssues7 Insurance Coverage?

• Would yypou be protected b y insurance if you were sued in a situation like those we have discussed? – No insurance coverage under the former law firm’s professional lia bilitbility insurance policy because polic ies norma lllly onlly cover acts committed while at the law firm – Coverage would depend on whether your new corporate employer has professional liability insurance coverage or another form of coverage that would cover these violations • Is the corporation covered against claims by third parties arising from mishandling of lawyer mobility issues?

@BlankRomeLLP #EmergingIssues7 II. Any Risk of Corporate Law Department Disqua lificati on?

• Law firms are frequently subject to motions to disqqyualify, and the y are sometimes granted • Typical grounds for disqualification of a law firm: – Concurrent under Rule 1. 7 – Conflicts with former client under Rule 1.9

@BlankRomeLLP #EmergingIssues7 What about Non-Law-Firm Law Departments and Corporate Law Departments?

• THE RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 123: – Comment d(i): • “Corporate Legal Offices. No case authority has been found. The Comment agrees with and follows the doctrine suggested in the ABA Model Rules of Professional Conduct (1983). Rule 1.10, Comment 2.” – Comment d(ii): • “The position taken in the Section and Comment is that imputation is appropriate if either organization or physical working relationships warrant.”

@BlankRomeLLP #EmergingIssues7 What about Non-Law-Firm Law Departments and Corporate Law Departments?

• As to other kinds of in-house law departments, however, especially government legal offices, imputation has been found, and effective disqualification or its equivalent has occurred – In-house government legal offices: • See, e.g., State v. Dean Foods, Prod. Co., 605 F.2d 380 (8th Cir. 1979) (private practice lawyer becomes Assistant Attorney General; disqualification of lawyer and imputation to entire the government office)

@BlankRomeLLP #EmergingIssues7 What about Non-Law-Firm Law Departments and Corporate Law Departments?

– ’ offices: • Compare v. Caggiano, 660 F.2d 184 (6th Cir. 1981) ( attorney joins U.S. Attorney’s office; no disqualification and no iitti)mputation) with SttState v. Tippecanoe County t , 432 N. E. 2d 1377 (Ind. 1982) (defense attorney joins ’s office; office disqq)ualified) and State v. , 524 P.2d 999 ((ppN.M. Ct. App. 1974) (entire office disqualified)

@BlankRomeLLP #EmergingIssues7 What about Non-Law-Firm Law Departments and Corporate Law Departments?

– Public defenders’ offices: • See, e.g., Commonwealth v. Westbrook, 400 A. 2d 160 (Pa. 1979) (dual representation within office not permitted) – Nonprofit legal services offices: • See, e.g., Flores v. Flores, 598 P.2d 893 (Alaska 1979) (dual representation within office not permitted without screening)

@BlankRomeLLP #EmergingIssues7 Anticipating and Defending against Potential Disqualification

• Typical grounds for defense under Rules 1.9 (former clients) and 1.10 (imputation): • Lateral lawyer had no involvement in adverse matters • Lateral lawyer had involvement, but lateral lawyer did not have access to “ material information” in adverse matters or regarding adverse party • Consents –Proper screening and notice in the context of former government lawyers

@BlankRomeLLP #EmergingIssues7 Offensive Use of Disqualification against Opposin g Counsel and Other Law Departments • Keep an eye out for where your former lawyers end up: – Are they in an opposing law firm? – Are they in an oppos ing corpora te law department? • Promppytly inform outside counsel of potential adversity of former in- house lawyers – Lit iigat ion and transact iona l – What about also informing the other law department or the adversary’s counsel?

@BlankRomeLLP #EmergingIssues7