The Motion to Disqualify: A Recurring Theme in the Modern Law Firm

The global marketplace is not a static institution. The corporate identities of both plaintiffs and defendants can change over the course of a lawsuit. As these changes occur, conflicts can unexpectedly materialize and disappear with sometimes alarming results. Ideally, law firms will stay ahead of the curve and find out about the corporate changes (and shifting conflicts picture) before the motion to disqualify is filed. That doesn't always happen. As long as the law firm and client are innocent and could not reasonably have anticipated the corporate change to occur, though, most courts today will fashion a fair and equitable remedy protecting the legitimate interests of all parties, rather than order the wholesale disqualification of an entire law firm.

A good example of the corporate reorganization problem arose very recently in early 2007 within the context of patent litigation involving the highly regarded firm of Hunton & Williams LLP. According to published reports, Hunton was representing General Electric Company's more recently acquired healthcare division, Amersham PLC, in New York litigation against Enzo Biochem, Inc. Simultaneously, Hunton was representing Enzo in Connecticut litigation, where there was significant subject matter overlap with the New York lawsuit, against other companies.

General Electric was permitted to intervene in the Connecticut lawsuit to file a disqualification motion against Hunton. U.S. District Judge Janet Bond Atherton denied the disqualification motion, but simultaneously issued some strict conditions on Hunton's future conduct. Judge Atherton ruled that Hunton: 1) could not assist Enzo's New York lawyers; 2) could not prepare witnesses or attend depositions or hearings in the New York case; and 3) could not represent Enzo in any appeals that would require Hunton to advance arguments that were inconsistent with any positions that had been or could be advanced by Amersham, the General Electric subsidiary, in the New York litigation.

Hunton was fortunate that it could continue to represent Enzo, albeit with some restrictions, in the Connecticut litigation. Not all law firms in similar circumstances have fared as well. Apart from the reputational damage that can result when a disqualification motion is granted, firms can lose clients, as well as attorneys and revenues. Moreover, the risk of malpractice exposure increases in these types of situations. Finally, attorney grievance proceedings while rare, are still possible, as well.

The 'Interview of the Now Adverse Party' Conflict

One of the great urban legends in American jurisprudence is the big corporation that interviews all the good law firms in town just to conflict them out of representing the other side against the corporation. This legend has some truthful anecdotes behind it. I believe that most courts today, however, would not disqualify the interviewed law firm in this scenario ' as long as the firm promptly instituted a firewall to screen the interviewed attorneys from their colleagues who were representing the party that was adverse to the corporation.

Today's version of this urban legend ' which occurs far more frequently, in my opinion ' involves a more innocent situation. By way of illustration, assume that Partner X works in a large firm's suburban office and is referred a matter. He obtains information orally from the prospective client to decide whether the case is worthwhile. He then turns down the matter ' perhaps because another lawyer in the firm's main office represents the adverse party on other matters, or perhaps because he doesn't think, upon reflection, that the case will be either interesting or profitable. Or perhaps the prospective client decides to retain a different law firm, for whatever reason. Partner X's first mistake was not to perform a conflicts check before learning the information from the prospective client. Unfortunately, this happens all too frequently in large firms ' sometimes with very serious consequences. But does this mistake prevent a different lawyer in the firm from representing his client, pre-existing or otherwise, on that matter against the prospective client who never hired the firm in the first place? Sometimes the answer is 'yes,' but more often than not the answer is 'no.'

More and more jurisdictions have rules covering this situation and providing a safe harbor to the firm that promptly screens Partner X from the matter. Rule 1.18 of the District of Columbia Rules of Professional Conduct, which became effective on Feb. 1, 2007, is a good example. Of course, even in jurisdictions like the District of Columbia, inventive lawyers undoubtedly will move to disqualify a firm because the screen was not implemented 'promptly' enough. Moreover, the proliferation of firewalls in large firms means yet another system that the firm must staff and monitor. Since firewalls are one of the ways that firms are able to grow by working on more matters involving clients and prospective clients with diverse interests, however, this simply is, in my opinion, part of the cost of doing business in today's big firm.

The 'Law Firm Acquisition' Conflict of Interest

The 'law firm acquisition' conflict arises when new lawyers join the firm. The easy issue to recognize occurs when the new lawyers bring the case with them that is adverse to existing clients. The medium issue occurs when the new lawyers don't bring the case that is adverse to a firm client, but personally worked on it at the prior firm. The hard case arises in jurisdictions that find a conflict as long as the new lawyers were associated with the old law firm at the same time that the old firm represented the adverse party in the new firm's case.

In all three examples, the parties can agree to waive the conflict. But if a disqualification motion is filed instead, difficult issues can arise for the new firm. Of course, the ethics rules in more and more jurisdictions permit the firm to hire the new attorney (while instituting a firewall), as long as the new attorney doesn't bring the conflict-producing matter to the new firm. In those jurisdictions, the easy issue is still a problem, but the medium issue isn't.

Regardless of the jurisdiction, though, careful firms will usually discover the first two conflicts ' the easy and medium ones ' pursuant to the new attorney vetting process. In that regard, it is critically important that the hiring firm vet the issue before the prospective attorney leaves his prior firm. Otherwise, the damage may be irreversible and the firm may get disqualified if the new attorney joins the firm without the conflict issue being resolved first. Indeed, even when the hiring firm discovers the problem before the new attorney is on board, if the issue is serious enough, the lateral candidate may not be able to be hired during the pendency of the matter giving rise to the conflict. The third hypothetical, where the new attorney never worked for the client that creates the conflict, is extremely difficult to uncover until the new attorney is on board and someone complains. By then it may be too late for prophylactic steps (such as a firewall) to do any good. Under those circumstances, the new firm may get disqualified if it does not withdraw voluntarily first.

The 'Lawyer As a Witness' Conflict of Interest

In many jurisdictions, a lawyer can testify at trial even when his or her partner is trial counsel for the client. One exception to this rule in such jurisdictions arises when the testifying attorney's version of the facts is contrary to or otherwise adverse to the client's version. The rule and its exception seem straightforward enough. The problem arises, however, when opposing counsel tries to push the envelope by arguing that minor differences between the versions of the attorney and client are significant enough to create a conflict. Sometimes, opposing counsel will file or threaten a disqualification motion. Other times, with more subtle (or devious) opposing counsel, a different strategy is employed. Such counsel may never mention disqualification, but instead will argue vehemently (to the jury, if the judge permits it) that the testimony of the lawyer/witness (who happens to be the partner of trial counsel) destroys the credibility of the lawyer/witness's client.

In these types of situations, the law firm must carefully monitor the progress of discovery. Moreover, trial counsel must be even more vigilant than usual in preparing witnesses and harmonizing testimony. Otherwise, the conflict of interest specter ' even if it is a weak argument in the particular case at hand ' can be employed to drive a wedge between the testifying attorney and the client that can be harmful to the client, especially before a jury.

Systems for Decreasing the Risk of Disqualification Motions

Legal ethics and conflicts of interest raise technical issues that can be just as complicated as the most sophisticated tax or antitrust problem. The complexity of those ethics issues is magnified by the fact that rules vary significantly from jurisdiction to jurisdiction ' and because it is not always easy to determine which jurisdiction's rules will apply to a given issue. The larger a law firm becomes, the more important it is for an experienced ethics attorney to oversee the conflicts system, including the firewall portion of that system. Moreover, the importance of sophisticated computer databases is critical to managing these issues, as well. This includes the firm's financial systems as well, since many if not all jurisdictions that recognize firewalls require that the screened attorney not receive any remuneration from those matters as to which the attorney is being screened.

A centralized ethics function can help to foster consistency across practice groups and geographical distance. The ethics function should also take responsibility for training lawyers and other firm personnel to recognize and appreciate these issues. Finally, firm management must take responsibility for fostering a climate and culture in which everyone is encouraged to raise issues at the earliest moment. That way, the firm can decide the appropriate course of action to take, including the possibility of firewalls. The firm can sometimes decide to voluntarily withdraw, but the firm otherwise will often decide to pursue a vigorous opposition to the disqualification motion. Whether the client pays for that opposition, of course, is a separate question that depends upon a host of factors. I will save that issue for a future article.

Jeffrey P. Ayres is a partner at Venable LLP, with offices in New York, California, Washington, DC, Maryland, and Virginia. For many years, Ayres has chaired Venable's Ethics Committee. He regularly advises management (including law firms) on ethics and employment issues. He can be reached at [email protected].

High-stakes disputes often generate hardball tactics by the parties and their attorneys. Even before the lawsuit is filed, attorneys are claiming conflicts of interest, on the part of opposing counsel, with increasing regularity and fervor. As law firms grow, clients merge or divest divisions, and attorney departures and arrivals become more common, conflicts of interest ' and the possibility for disqualification motions ' become a larger problem for law firms. Do such motions present a legitimate complaint mechanism for wronged clients, or simply one more arrow in the quiver of the scorched earth litigator? Regardless of what you think is the correct answer to the preceding question, disqualification motions and threats are unquestionably something that modern law firms are forced to address with increasing frequency.

In this article, I identify several of the more typical scenarios that give rise to disqualification motions. I then discuss systemic steps that law firms should consider implementing in order to manage the risk of such motions. In that regard, the three most important things for law firms to remember are: 1) to have a centralized ethics function overseen by an experienced ethics partner, coupled with a sophisticated computer database, to manage the process; 2) to train lawyers and other personnel to recognize the issues and problems that can result when conflicts of interest arise in the litigation context; and 3) to develop a culture where law firm personnel report issues and problems at the earliest moment so that corrective action (such as firewalls) can be implemented before it is too late.

The 'Corporate Reorganization' Conflict of Interest

The global marketplace is not a static institution. The corporate identities of both plaintiffs and defendants can change over the course of a lawsuit. As these changes occur, conflicts can unexpectedly materialize and disappear with sometimes alarming results. Ideally, law firms will stay ahead of the curve and find out about the corporate changes (and shifting conflicts picture) before the motion to disqualify is filed. That doesn't always happen. As long as the law firm and client are innocent and could not reasonably have anticipated the corporate change to occur, though, most courts today will fashion a fair and equitable remedy protecting the legitimate interests of all parties, rather than order the wholesale disqualification of an entire law firm.

A good example of the corporate reorganization problem arose very recently in early 2007 within the context of patent litigation involving the highly regarded firm of Hunton & Williams LLP. According to published reports, Hunton was representing General Electric Company's more recently acquired healthcare division, Amersham PLC, in New York litigation against Enzo Biochem, Inc. Simultaneously, Hunton was representing Enzo in Connecticut litigation, where there was significant subject matter overlap with the New York lawsuit, against other companies.

General Electric was permitted to intervene in the Connecticut lawsuit to file a disqualification motion against Hunton. U.S. District Judge Janet Bond Atherton denied the disqualification motion, but simultaneously issued some strict conditions on Hunton's future conduct. Judge Atherton ruled that Hunton: 1) could not assist Enzo's New York lawyers; 2) could not prepare witnesses or attend depositions or hearings in the New York case; and 3) could not represent Enzo in any appeals that would require Hunton to advance arguments that were inconsistent with any positions that had been or could be advanced by Amersham, the General Electric subsidiary, in the New York litigation.

Hunton was fortunate that it could continue to represent Enzo, albeit with some restrictions, in the Connecticut litigation. Not all law firms in similar circumstances have fared as well. Apart from the reputational damage that can result when a disqualification motion is granted, firms can lose clients, as well as attorneys and revenues. Moreover, the risk of malpractice exposure increases in these types of situations. Finally, attorney grievance proceedings while rare, are still possible, as well.

The 'Interview of the Now Adverse Party' Conflict

One of the great urban legends in American jurisprudence is the big corporation that interviews all the good law firms in town just to conflict them out of representing the other side against the corporation. This legend has some truthful anecdotes behind it. I believe that most courts today, however, would not disqualify the interviewed law firm in this scenario ' as long as the firm promptly instituted a firewall to screen the interviewed attorneys from their colleagues who were representing the party that was adverse to the corporation.

Today's version of this urban legend ' which occurs far more frequently, in my opinion ' involves a more innocent situation. By way of illustration, assume that Partner X works in a large firm's suburban office and is referred a matter. He obtains information orally from the prospective client to decide whether the case is worthwhile. He then turns down the matter ' perhaps because another lawyer in the firm's main office represents the adverse party on other matters, or perhaps because he doesn't think, upon reflection, that the case will be either interesting or profitable. Or perhaps the prospective client decides to retain a different law firm, for whatever reason. Partner X's first mistake was not to perform a conflicts check before learning the information from the prospective client. Unfortunately, this happens all too frequently in large firms ' sometimes with very serious consequences. But does this mistake prevent a different lawyer in the firm from representing his client, pre-existing or otherwise, on that matter against the prospective client who never hired the firm in the first place? Sometimes the answer is 'yes,' but more often than not the answer is 'no.'

More and more jurisdictions have rules covering this situation and providing a safe harbor to the firm that promptly screens Partner X from the matter. Rule 1.18 of the District of Columbia Rules of Professional Conduct, which became effective on Feb. 1, 2007, is a good example. Of course, even in jurisdictions like the District of Columbia, inventive lawyers undoubtedly will move to disqualify a firm because the screen was not implemented 'promptly' enough. Moreover, the proliferation of firewalls in large firms means yet another system that the firm must staff and monitor. Since firewalls are one of the ways that firms are able to grow by working on more matters involving clients and prospective clients with diverse interests, however, this simply is, in my opinion, part of the cost of doing business in today's big firm.

The 'Law Firm Acquisition' Conflict of Interest

The 'law firm acquisition' conflict arises when new lawyers join the firm. The easy issue to recognize occurs when the new lawyers bring the case with them that is adverse to existing clients. The medium issue occurs when the new lawyers don't bring the case that is adverse to a firm client, but personally worked on it at the prior firm. The hard case arises in jurisdictions that find a conflict as long as the new lawyers were associated with the old law firm at the same time that the old firm represented the adverse party in the new firm's case.

In all three examples, the parties can agree to waive the conflict. But if a disqualification motion is filed instead, difficult issues can arise for the new firm. Of course, the ethics rules in more and more jurisdictions permit the firm to hire the new attorney (while instituting a firewall), as long as the new attorney doesn't bring the conflict-producing matter to the new firm. In those jurisdictions, the easy issue is still a problem, but the medium issue isn't.

Regardless of the jurisdiction, though, careful firms will usually discover the first two conflicts ' the easy and medium ones ' pursuant to the new attorney vetting process. In that regard, it is critically important that the hiring firm vet the issue before the prospective attorney leaves his prior firm. Otherwise, the damage may be irreversible and the firm may get disqualified if the new attorney joins the firm without the conflict issue being resolved first. Indeed, even when the hiring firm discovers the problem before the new attorney is on board, if the issue is serious enough, the lateral candidate may not be able to be hired during the pendency of the matter giving rise to the conflict. The third hypothetical, where the new attorney never worked for the client that creates the conflict, is extremely difficult to uncover until the new attorney is on board and someone complains. By then it may be too late for prophylactic steps (such as a firewall) to do any good. Under those circumstances, the new firm may get disqualified if it does not withdraw voluntarily first.

The 'Lawyer As a Witness' Conflict of Interest

In many jurisdictions, a lawyer can testify at trial even when his or her partner is trial counsel for the client. One exception to this rule in such jurisdictions arises when the testifying attorney's version of the facts is contrary to or otherwise adverse to the client's version. The rule and its exception seem straightforward enough. The problem arises, however, when opposing counsel tries to push the envelope by arguing that minor differences between the versions of the attorney and client are significant enough to create a conflict. Sometimes, opposing counsel will file or threaten a disqualification motion. Other times, with more subtle (or devious) opposing counsel, a different strategy is employed. Such counsel may never mention disqualification, but instead will argue vehemently (to the jury, if the judge permits it) that the testimony of the lawyer/witness (who happens to be the partner of trial counsel) destroys the credibility of the lawyer/witness's client.

In these types of situations, the law firm must carefully monitor the progress of discovery. Moreover, trial counsel must be even more vigilant than usual in preparing witnesses and harmonizing testimony. Otherwise, the conflict of interest specter ' even if it is a weak argument in the particular case at hand ' can be employed to drive a wedge between the testifying attorney and the client that can be harmful to the client, especially before a jury.

Systems for Decreasing the Risk of Disqualification Motions

Legal ethics and conflicts of interest raise technical issues that can be just as complicated as the most sophisticated tax or antitrust problem. The complexity of those ethics issues is magnified by the fact that rules vary significantly from jurisdiction to jurisdiction ' and because it is not always easy to determine which jurisdiction's rules will apply to a given issue. The larger a law firm becomes, the more important it is for an experienced ethics attorney to oversee the conflicts system, including the firewall portion of that system. Moreover, the importance of sophisticated computer databases is critical to managing these issues, as well. This includes the firm's financial systems as well, since many if not all jurisdictions that recognize firewalls require that the screened attorney not receive any remuneration from those matters as to which the attorney is being screened.

A centralized ethics function can help to foster consistency across practice groups and geographical distance. The ethics function should also take responsibility for training lawyers and other firm personnel to recognize and appreciate these issues. Finally, firm management must take responsibility for fostering a climate and culture in which everyone is encouraged to raise issues at the earliest moment. That way, the firm can decide the appropriate course of action to take, including the possibility of firewalls. The firm can sometimes decide to voluntarily withdraw, but the firm otherwise will often decide to pursue a vigorous opposition to the disqualification motion. Whether the client pays for that opposition, of course, is a separate question that depends upon a host of factors. I will save that issue for a future article.

Jeffrey P. Ayres is a partner at Venable LLP, with offices in New York, California, Washington, DC, Maryland, and Virginia. For many years, Ayres has chaired Venable's Ethics Committee. He regularly advises management (including law firms) on ethics and employment issues. He can be reached at [email protected].