Inside Track: Disqualification: New ethics opinion helps lawyers avoid the 'Tony Soprano' situation:

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  • Disqualification: New ethics opinion helps lawyers avoid the 'Tony Soprano' situation

    Wisconsin Supreme Court Rule 20:1.18 clarifies an attorney's duties with regard to prospective clients. A newly released ethics opinion provides guidance on avoiding situations in which attorneys receive "significantly harmful information" that will disqualify them, or their law firms, from representing other clients in the same or substantially similar matter.

    Joe Forward

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    Disqualification: New ethics opinion helps lawyers avoid the “Tony Soprano” situation

    Jan. 19, 2011 – Remember the episode from The Sopranos when Tony and Carmela contemplate divorce? Tony goes to every good divorce attorney in the area and reveals information that ethically prevented those attorneys from representing Carmela when she came to them seeking a divorce lawyer.

    Well, the State Bar of Wisconsin’s Professional Ethics Committee recently released Formal Ethics Opinion EF-10-03, which addresses the potential for obtaining information from a prospective client that will disqualify the attorney from representing other clients in the same or a substantially related matter. It does not, however, guide attorneys in the event that Tony Soprano is the prospective client.

    “Lawyers very often are contacted by people in an informal setting who are asking for off-the-cuff advice concerning legal issues or claims,” said Dean Dietrich, chair of the State Bar’s Professional Ethics Committee. “Because lawyers can give information that creates a lawyer-client relationship, they often struggle with whether to give answers in this setting.”

    Dietrich says people often approach lawyers at cocktail parties or other social functions without knowing the ethical considerations that a lawyer may face in providing advice. He said it’s not uncommon for a party to bring a motion to disqualify a lawyer from representing a client based on information that was exchanged with a prospective client in the same or a similar matter.

    “A lot of times, this comes up in a small business setting, or in a situation where a lawyer represents an insurance company and someone from the community asks the lawyer legal questions relating to insurance coverage,” Dietrich said.

    The opinion, issued Dec. 17, 2010, replaces Ethics Opinion E-89-5 and responds to the Wisconsin Supreme Court’s adoption of Supreme Court Rule (SCR) 20:1.18, which imposes specific duties on attorneys in consulting with prospective clients. Prior to 20:1.18, lawyers dealt with the issue under conflict of interest rules.

    The rule and the ethics opinion

    Under 20:1.18, issued in 2007, a prospective client is a person who discusses with a lawyer the possibility of forming a client-lawyer relationship. However, 20:1.18, comment 2 provides that “[a] person who communicates information unilaterally to a lawyer, without any reasonable expectation that the lawyer is willing to discuss the possibility of forming a client-lawyer relationship, is not a ‘prospective client’ within the meaning of paragraph (a).”

    Thus, a lawyer must not create the expectation of a lawyer-client relationship in discussions with a person he or she does not intend to represent. But when a lawyer consults with a prospective client, the lawyer should remember that obtaining certain information before accepting the representation can disqualify the lawyer from representing other clients.

    Under SCR 20:1.18, a lawyer that receives information “that could be significantly harmful to that person in the matter” cannot represent another client “with interests materially adverse to those of a prospective client in the same or a substantially related matter.”

    A disqualification of one lawyer under the rule means “no lawyer in a firm with which that lawyer is associated may knowingly undertake or continue representation in such a matter.”

    SCR 20:1.18 does not define what constitutes “significantly harmful information.” Thus, in reviewing case law and other ethics opinions, the ethics committee in EF-10-03 has identified certain situations in which information could rise to the level of “significantly harmful.”

    Those situations involve cases in which sensitive personal information is exchanged,1 when a lawyer obtains possession of a prospective client’s financial information,2 learns of a prospective client’s settlement position,3 the client’s personal thoughts on litigation strategies or impressions regarding the facts of the case,4 and any other information that could be used to the detriment of the prospective client in the matter.

    The ethics opinion also notes that even if significantly harmful information may be discoverable at some point in the future, that doesn’t mean obtaining such information from a prospective client at the outset would not lead to disqualification.

    Avoiding disqualification

    The opinion directs lawyers to follow American Bar Association Formal Ethics Opinion 90-358 to avoid disqualification by limiting the scope of an initial interview.

    The ABA directs attorneys to gather only the information that is sufficient to determine whether a conflict of interest exists, whether the lawyer is capable of representing the client, and whether the lawyer is willing to represent the client.

    Under SCR 20:1.18, a lawyer can also avoid disqualification by informing the prospective client that no information disclosed will prohibit the lawyer from representing a different client in the matter. The prospective client can also consent to a lawyer using the information obtained.

    However, a lawyer cannot obtain informed consent without adequately explaining to the prospective client the material risks involved in disclosing information. In other words, the client must reasonably understand “the material risks that the waiver entails.”

    The State Bar’s ethics opinion notes that a lawyer must explain, in plain language, that the lawyer may represent opposing parties, and the client has no obligation to agree to the waiver.

    But consent does not constitute consent to disclose confidential information or use confidential information to the disadvantage of the prospective client.

    Avoiding law firm imputation

    Under SCR 20:1.18, if a lawyer is disqualified, the lawyer’s law firm can take steps to avoid imputation of all other lawyers in the firm in two ways.

    First, the law firm can obtain informed consent from the prospective client, in writing, after informing the prospective client of the material risks involved, the alternatives, and providing the client with an opportunity to raise questions and concerns.

    Second, the law firm can still represent a prospective client that has provided a firm attorney with “significantly harmful information” if “the lawyer who received the information took reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client.”

    The disqualified lawyer must be timely screened from participation, and may not receive any fee derived from the matter. The law firm must also give the client prompt written notice, which allows the client to challenge the sufficiency of the screening process.

    Conclusion

    Unless an attorney is at the whim of Tony Soprano, it may be better to avoid disqualification in order to leave open the possibility of representing other clients, even in the same or substantially similar matter. Following the guidance of this new ethics opinion, attorneys can avoid the situation in which they, or their law firms, become disqualified from representation.

    For ethics questions, State Bar Ethics Counsel Timothy J. Pierce can be reached at (608) 250-6168, (800) 444-9404, ext. 6168, or org tpierce wisbar wisbar tpierce org

    By Joe Forward, Legal Writer, State Bar of Wisconsin

    Endnotes

    1 See Sturdivant v. Sturdivant, 367 Ark. 514, 241 S.W. 3d 740 (2006) (Court disqualified a law firm from representing the mother in a child custody case because the father previously consulted with a firm attorney and disclosed certain facts that would be significantly harmful to him in the matter).

    2 See Artificial Nail Technologies, Inc. v. Flowering Scents, LLC, 2006 WL 2252237 (D. Utah) (unpublished opinion).

    3 See ADP, Inc. v. PMJ Enterprises, LLC, 2007 WL 836658 (D.N.J.) (unpublished opinion) (A lawyer that learns the percentage of settlement that the prospective client is willing to accept and the concessions that the prospective client is willing to make could be significantly harmful).

    4 See Chemcraft Holdings Corp. v. Shayban, 2006 WL 2839255 (N.C. Super) (unpublished opinion).

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