Vol. 84, No. 9, September 2011
Many lawyers or law firms will eventually confront a conflict-of-interest disqualification motion. Anticipating disqualification motion issues can help attorneys take steps to avoid future disqualifications and successfully navigate disqualification motions. Litigants can bring disqualification motions based on an attorney’s or law firm’s conflict of interest with a current, former, or prospective client. Until recently, however, it was unclear under Wisconsin law whether nonclients had standing to raise disqualification motions.
In a recent Wisconsin Supreme Court case of first impression, Foley-Ciccantelli v. Bishop’s Grove Condominium Ass’n Inc., the court clarified the issue by determining that a nonclient can establish standing by satisfying certain criteria.1 Because nonclients can demonstrate standing to raise disqualification motions, the prospective-client screening process now may require more diligence to determine whether a conflict of interest exists. Avoiding future conflicts may also require greater effort.
In addition to the standing issue discussed in Foley-Ciccantelli, Wisconsin courts have examined a variety of other issues that could affect a disqualification motion’s success or failure. This article discusses steps to avoid future disqualification and also presents a general overview of the following disqualification-motion issues: standing; delay doctrines; current, former, and prospective clients; law firm imputation; evidentiary hearings; criminal cases; applicability of ABA commentary; and appeals.
Background of Foley-Ciccantelli
Susan Foley-Ciccantelli and her husband owned a condominium that was part of the Bishop’s Grove Condominium Association.2 Ms. Foley-Ciccantelli was injured after slipping and falling, and she alleged that Bishop’s Grove negligently allowed ice and snow to accumulate in a common area of the condominium complex.3
Ms. Foley-Ciccantelli and her husband (the plaintiffs) hired an attorney to bring a personal injury action against Bishop’s Grove and its insurer.4 The plaintiffs’ attorney ran a conflict-of-interest check and confirmed that his law firm had never represented Bishop’s Grove.5 However, it was later learned that the exclusive managing agent of the condominium complex was a former client of the plaintiffs’ law firm.6 The plaintiffs’ law firm’s prior representations of the managing agent did not involve Bishop’s Grove.7
Bishop’s Grove filed a motion to disqualify the plaintiffs’ law firm based on the firm’s prior representation of the managing agent.8 Bishop’s Grove alleged that “Bishop’s Grove’s liability in the slip-and-fall case might arise from the acts or omissions of the [managing agent] in maintaining the common property at Bishop’s Grove.”9 The circuit court concluded that the plaintiffs’ law firm did not engage in unethical conduct of any kind.10 However, the circuit court granted the disqualification motion based on an “appearance of impropriety.”11
The plaintiffs’ law firm filed an interlocutory appeal alleging that Bishop’s Grove lacked standing to raise a disqualification motion and alleging that the two representations were not substantially related. The court of appeals certified the appeal and asked the supreme court to determine whether Bishop’s Grove, a nonclient, had standing to move to disqualify the plaintiffs’ attorney based on the plaintiffs’ law firm’s prior representation of the managing agent, and whether the circuit court erred in applying an “appearance of impropriety standard” in deciding the disqualification motion.12
In most cases, a current or former client raises the disqualification motion, and standing is not an issue. Standing is more difficult to determine when nonclients challenge an attorney’s representation. In Foley-Ciccantelli, the supreme court considered the differences among other jurisdictions regarding nonclient standing to raise a disqualification motion.13 The court noted that many jurisdictions follow a strict rule that nonclient parties lack standing to raise a disqualification motion, and a minority of jurisdictions follow a broad rule that nonclient parties have standing to raise a disqualification motion.14
The supreme court decided to follow what it described as a “middle course” and concluded that as a general rule, “only a former or current client has standing to move to disqualify an attorney from representing someone else in a civil action.”15 However, nonclients might have standing if “the prior representation is so connected with the current litigation that the prior representation is likely to affect the just and lawful determination of the non-client party’s position.”16
The supreme court justified its rejection of the strict no-standing rule by pointing out that Wisconsin’s direct-action statute allows plaintiffs to bring actions directly against insurance companies without naming the insured.17 Under the strict rule, the insurance company would not have standing to raise a disqualification motion in a direct action if the plaintiff’s attorney previously represented the insured.
Douglas J. Hoffer, Marquette 2010, is an associate at de la Mora & de la Mora, Elm Grove. During law school he worked as a law clerk at the firm that represented the plaintiffs in Foley-Ciccantelli and assisted with research for the appeal. He thanks Hector and Linda de la Mora for their feedback during the writing of this article. Contact Hoffer at firstname.lastname@example.org.
The supreme court articulated a three-part test to determine whether a party has standing to raise a disqualification motion: 1) whether the party whose standing is challenged has a personal interest in the controversy; 2) whether the interest of the party whose standing is challenged will be injured; and 3) whether judicial policy calls for protecting the interest of the party whose standing has been challenged.18
No opinion in Foley-Ciccantelli obtained more than three justices’ support, but four justices agreed that if a party demonstrates a “personal stake,” a party can establish standing. Justice Prosser’s concurring opinion stated “[f]or the most part, the lead opinion substitutes the phrase ‘personal interest’ for ‘personal stake.’ So long as these phrases mean the same thing there should be no complaint. If, however, the phrase ‘personal interest’ means something less than ‘personal stake,’ I do not subscribe to it.”19
Procedural and Policy Considerations
In addition to standing, other procedural doctrines circuit courts consider are delay doctrines such as waiver, laches, and estoppel. The American Bar Association Model Rules of Professional Conduct (the ABA Model Rules) Scope cautions that “the purpose of the rules can be subverted when they are invoked by opposing parties as procedural weapons.” Opposing parties in litigation often bring disqualification motions, which might be abused for strategic purposes. Consequently, courts often examine procedural doctrines to prevent such abuses.
Additionally, courts must reconcile competing policy considerations when determining whether to grant disqualification motions. Litigants have an important interest in being represented by the counsel of their choice, and thus disqualification should be applied carefully to avoid undercutting this interest without justification.20 On the other hand, courts are given broad discretion in determining whether to grant disqualification motions, and doubts regarding the existence of an asserted conflict of interest are to be resolved in favor of disqualification.21
Attorneys who wish to move to disqualify opposing counsel should act quickly and decisively. There is no bright-line time limit for bringing disqualification motions. Instead, a failure to act quickly may result in the court denying the motion based on waiver, laches, or estoppel.22 Courts often use these terms interchangeably when discussing the timeliness of disqualification motions, but understanding the different elements of each doctrine might benefit an attorney bringing or defending against a disqualification motion.
In determining whether a disqualification motion is timely, courts pay particular attention to the amount of work completed by the attorney on the matter. Additionally, courts examine whether disqualification will prejudice the other party. Factors affecting the timeliness of the motion include the number of times the attorney has appeared in court on the matter, whether the former client was present for the attorney’s court appearances, whether the case presents a complicated set of facts or law, the number of hours the attorney has billed, and whether a trial on the matter is imminent.
Disqualification motions are not the only way to remove an attorney with a possible conflict of interest from a case. An attorney should consider asking the attorney with the conflict to voluntarily withdraw early in the representation. Attorneys are more likely to voluntarily withdraw from a representation if they have not yet expended a great deal of time and effort on the matter. Attorneys are also less likely to resent an informal request to withdraw than a formal disqualification order from the court. Persuading an attorney to voluntarily withdraw will also eliminate the costs associated with a disqualification motion and a possible appeal.
Determining Whether a Client is a Current Client or a Former Client
Figuring out whether a client is a current client or a former client is essential in understanding the proper rule to apply in a disqualification motion. SCR 20:1.7 governs concurrent-client conflicts of interest, while SCR 20:1.9 governs former-client conflicts of interest.
Determining whether an individual qualifies as a current or former client can sometimes be difficult. “Whether an attorney-client relationship is formed depends upon the intent of the parties and is a question of fact.”23 A client may still consider himself or herself a current client even if the law firm has not provided any services to him or her in a long time. For example, a person may believe that he is still a client of the law firm that provided him with estate-planning services because the law firm might again provide services after he dies.
Additionally, terminating the attorney-client relationship with one client might not be enough to turn a concurrent conflict into a successive conflict.24 The “hot potato doctrine” holds that “a firm may not drop a client like a hot potato, especially if it is in order to keep happy a far more lucrative client.”25
Current-Client Disqualification Motions
SCR 20:1.7 governs concurrent conflicts of interest. In determining whether to grant a disqualification motion in a dual representation, courts must answer the following questions: 1) Has the attorney undertaken representation that is directly adverse to the interests of a present client? 2) Is there a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client, or a third person or by a personal interest of the lawyer?
Nevertheless, even if a concurrent conflict of interest exists, the attorney may represent a client if 1) the lawyer reasonably believes that he will be able to provide competent and diligent representation to each affected client; 2) the representation is not prohibited by law; 3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and 4) each affected client gives informed consent, confirmed in a writing signed by that client.26
Obtaining informed consent may be the biggest obstacle to keeping clients whose cases result in the attorney having concurrent conflicts of interest. Informed consent is “the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.”27 Obtaining informed consent requires both a willing client and the ability to guess what might happen in the future. As Yogi Berra once said, “[i]t is difficult to make predictions, especially about the future.”28
Former-Client Disqualification Motions
Former-client conflicts of interest involve the application of SCR 20:1.9, which prohibits an attorney from representing a current client against a former client in a matter in which the representations are substantially related and the current client’s interests are materially adverse to those of the former client. The interests of the subsequent client are materially adverse to those of the former client if the current representation may cause the former client financial, legal, or some other identifiable harm.29 Although important, the adversity element has not been challenged at the appellate level as often as the substantial-relationship element.
In Foley-Ciccantelli, the Wisconsin Supreme Court articulated four purposes for the substantial relationship test: to protect the former client’s confidential information obtained in the course of the representation; to protect the present client by disqualifying counsel whose effectiveness might be limited because of an obligation to the former client; to protect attorneys by preventing representations for specific cases from turning into lifetime commitments; and to provide an opportunity to prevent conflicts before they actually occur.30
Matters are substantially related if the attorney could have obtained confidential information in the prior representation that might materially advance his or her client’s position in the subsequent representation. Success on a disqualification motion does not require proof that the attorney actually obtained confidential information in the first representation. On the contrary, courts presume that a client will disclose confidences to his or her attorney. The presumption is considered irrebuttable because of the impropriety of inquiring into communications between the client and the attorney to determine whether actual confidences were revealed.31
A prospective client is “a person who discusses with a lawyer the possibility of forming a client-lawyer relationship with respect to a matter.”32 Prospective clients are owed duties even if they do not become clients. If a prospective client communicates to an attorney information that, if known by another party, could “significantly harm” the prospective client, the attorney may not later represent a client with interests that are adverse to the prospective client in the same or a substantially related matter unless the attorney obtains informed consent.33
The State Bar’s Standing Committee on Professional Ethics recently described the following types of information that may qualify as “significantly harmful” to a prospective client: sensitive personal information; the prospective client’s financial information, if prematurely possessed; the prospective client’s settlement position; the prospective client’s litigation strategies; and information that could be used to the detriment of the prospective client.34
Law Firm Imputation Issues
Conflicts of interest pertaining to one member of a law firm may be imputed to the other members of the firm. SCR 20:1.10 is the general rule for imputed disqualifications, and lawyers at the same firm are generally treated as a single attorney for the purpose of disqualification motions. For purposes of the rule, a firm includes lawyers in law partnerships, legal departments of corporations, professional corporations, and other organizations. There are exceptions, however, to this general rule. An attorney whose conflict of interest is based on a personal interest that “does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm” may be able to avoid disqualification.
Additionally, disqualification can be avoided if the prohibited representation arises from a prior representation and 1) the personally disqualified lawyer performed only minor and isolated services in the disqualifying representation at a firm with which the lawyer is no longer associated; 2) the personally disqualified lawyer is timely screened from any participation in the matter and is not distributed part of the fee from the matter; and 3) written notice is promptly given to any affected former client to enable the affected client to determine whether the firm is complying with this rule.35
Furthermore, law firms generally are not prohibited from representing clients with adverse interests to a former client if the former client was represented by an attorney who is no longer associated with the firm.36 If the matter is substantially related to the former representation and a lawyer at the firm has confidential information, however, the firm may be disqualified.37
Whether evidentiary hearings are required in disqualification motions is not settled. Determining if matters are substantially related is case specific and depends on whether the factual contexts of the two representations are similar or related.38 Additionally, courts must undertake a reasonable inquiry and examination of the facts, and the record must show a reasonable basis for the court’s determination.39
A reasonable inquiry might only require an examination of affidavits and nothing more. If no facts are in dispute, an evidentiary hearing might not be necessary to determine whether disqualification is appropriate. The failure to hold an evidentiary hearing, however, increases the likelihood of reversal on appeal, particularly if the facts are in dispute. Moreover, even if the submitted affidavits include undisputed facts, there still might be an insufficient factual record to create a reasonable basis for the court’s disqualification determination.
In Foley-Ciccantelli, the supreme court could not determine whether a substantial relationship existed between the two representations and whether the current representation was materially adverse to the former client’s interest because of the “paucity of facts in the affidavits.”40 Accordingly, the supreme court remanded the matter to the circuit court for further proceedings to resolve these questions.41 Until more guidance is given on whether evidentiary hearings are required, parties to a disqualification motion probably should request an evidentiary hearing.
Although disqualification motions in criminal cases may implicate different rules and protections than those implicated in civil cases, the substantial-relationship test is also relevant to disqualification motions in criminal cases. Criminal courts apply the substantial-relationship test when, before trial, a defendant raises a disqualification motion based on a prior representation.42 Nevertheless, disqualification motions brought before trial may be denied even if the matters are substantially related if the motion is deemed “untimely.”43 For the defendant to be awarded a new trial in situations in which the disqualification motion is raised against a prosecutor after trial, the defendant must demonstrate by clear and convincing evidence that the attorney had an actual conflict of interest.44
Applicability of ABA Comments
The ABA Model Rules comments are another tool attorneys may use in navigating disqualification motions. The Wisconsin Supreme Court considers the Model Rules comments instructive when interpreting Wisconsin Supreme Court rules that are analogous to the ABA Model Rules.45 Because Wisconsin case law might not be available on every disqualification issue, the Model Rules comments may be useful in persuading courts in the proper analysis of a disqualification motion issue.
How to Successfully Appeal a Conflict-of-Interest Disqualification
Gaining appellate review of a circuit court’s disposition of a disqualification motion is difficult. Wisconsin’s general policy disfavors granting interlocutory appeals. Nevertheless, appealing nonfinal orders and judgments is possible with the court’s permission. Wisconsin Statute section 808.03(2) allows the court of appeals to grant an appeal from a nonfinal order or judgment if the court concludes that the appeal will 1) materially advance the termination of the litigation or clarify further proceedings in the litigation; 2) protect the petitioner from substantial or irreparable injury; or 3) clarify an issue of general importance in the administration of justice.
Reasonable arguments can generally be made that appellate review of disqualification motions will often satisfy the first two criteria mentioned in Wis. Stat. section 808.03(2). Litigation will generally proceed and conclude at a faster pace if replacement of an attorney is not required, and a party who loses his or her choice of counsel sustains a substantial injury. But as to the third criterion, not every case involves the possible clarification of an issue of general importance in the administration of justice. In Foley-Ciccantelli, the plaintiffs were able to demonstrate the need for immediate review by raising an issue of general importance: standing.
Additionally, the court of appeals is probably more likely to grant immediate review if an appellant can demonstrate that the circuit court likely made a mistake, although this factor is not expressly mentioned in Wis. Stat. section 808.03(2). In Foley-Ciccantelli, the plaintiffs were able to demonstrate that the circuit court likely erred when it applied an “appearance of impropriety” test.
How to Avoid Future Disqualifications
Completely eliminating the possibility of disqualifications is nearly impossible. There are, however, several steps attorneys can take to decrease the likelihood of disqualification.
First, use engagement letters to specify the identity of clients and nonclients, as well as to describe the representation’s scope. Conflict-of-interest rules generally do not apply to nonclients. As previously discussed, whether an attorney-client relationship is formed depends on the intent of the parties and is a question of fact. The best way to ensure client-identity clarity is to identify the client in the engagement letter, and, if possible, identify related individuals or entities that are not clients. In doing this, an attorney memorializes the intent of the parties. Specifically describing the scope of the representation, including what steps will indicate the completion of the representation, may help courts determine whether a client is a former client or a current client. An engagement letter that specifically describes the representation’s scope may also make it easier for a court to determine whether matters are “substantially related.”
Second, limit the initial interview. A limited initial interview decreases the probability that an attorney will receive “significantly harmful” information that may preclude a future representation. The ABA recommends obtaining “only information sufficient to determine whether a conflict or potential conflict of interest exists and whether the new matter is one within the lawyer’s capabilities and one in which the lawyer is willing to represent the would-be client.”46
Third, obtain prospective informed-consent waivers. For example, an attorney who represents a small corporation may represent the owners (individually) as well. Obtaining informed consent to continue representing the corporation if a dispute arises between the owners may keep the attorney from losing the corporation as a client. Informed-consent waivers should include detailed explanations of what types of conflicts may arise. General boilerplate consent waivers are less effective in preventing future disqualifications. Prospective conflict waivers are hardly bullet proof, however, and will not be honored by courts if there is a material change in facts after the client signs the waiver.
Fourth, arrange for substitute counsel or consider withdrawing as counsel if you think a conflict may develop. Many lawyers fear that arranging for substitute counsel may decrease business in the short term or make it possible the client may be “poached” by the substitute law firm. Additionally, many attorneys are understandably reluctant to drop a client because of a conflict that might not occur. These concerns are reasonable but should not outweigh the client’s best interests. Moreover, the risk of one client moving to another firm or the loss of one client’s business might be outweighed by the opportunity to continue another client’s representation conflict free.
Fifth, take reasonable steps to screen attorneys to avoid imputed disqualification. Proper screening includes restricting access to files, electronic databases, and correspondence and drafting written memoranda that detail restrictions, all in a timely fashion.47
Wisconsin’s new disqualification-motion standing doctrine articulated in Foley-Ciccantelli may require greater effort to avoid future disqualifications. Prudent attorneys will consider the impact of the new nonclient-standing doctrine, and use engagement letters, the initial interview, prospective informed-consent waivers, substitute counsel, and screening procedures to decrease future disqualifications.
In addition to avoiding future disqualifications, understanding the variety of issues can contribute to a disqualification motion’s success or failure. This article does not contain an exhaustive list of conflict-of-interest disqualification motion issues, and sensible attorneys will look to the Wisconsin Supreme Court Rules, the ABA Model Rules, and Wisconsin and other jurisdictions’ case law for additional guidance.
1 Foley-Ciccantelli v. Bishop’s Grove Condo. Ass’n Inc., 2011 WI 36, ¶ 71, 333 Wis. 2d 402, 797 N.W.2d 789.
2 Id. ¶ 16.
5 Id. ¶ 24.
6 Id. ¶ 20.
7 Id. ¶ 23.
8 Id. ¶ 20.
9 Id. ¶ 18.
10 Id. ¶ 2.
11 Id. ¶ 26.
12 Id. ¶ 4.
13 Id. ¶¶ 62-68.
15 Id. ¶¶ 69-72.
17 Id. ¶ 64.
18 Id. ¶ 40.
19 Id. ¶ 123 (Prosser, J., concurring).
20 Berg v. Marine Trust Co. N.A., 141 Wis. 2d 878, 887, 416 N.W.2d 643 (Ct. App. 1987).
21 Burkes v. Hales, 165 Wis. 2d 585, 595, 478 N.W.2d 37 (Ct. App. 1991).
22 See Batchelor v. Batchelor, 213 Wis. 2d 251, 570 N.W.2d 568 (Ct. App. 1997); see also State v. Medina, 2006 WI App 76, 292 Wis. 2d 453, 713 N.W.2d 172.
23 Dean R. Dietrich, Determining Current and Former Clients, 73 Wis. Law. 22 (August 2000) (citing Marten Transport v. Hartford Specialty Co., 194 Wis. 2d 1, 533 N.W.2d 452 (1995)).
24 Picker Int’l Inc. v. Varian Assocs., 670 F. Supp. 1363, 1365 (N.D. Ohio 1987), aff’d, 869 F.2d 578 (Fed. Cir. 1989); see also John Leubsdorf, Conflicts of Interest: Slicing the Hot Potato Doctrine (Rutgers School of Law-Newark Working Paper 079, Aug. 19, 2010).
26 SCR 20:1.7.
27 SCR 20:1.0(f).
28 See en.wikiquote.org, Yogi Berra.
29 Foley-Ciccantellii, 2011 WI 36, ¶ 111, 333 Wis. 2d 402.
30 Id. ¶ 99.
31 Medina, 2006 WI App 76, ¶ 17, 292 Wis. 2d 453.
32 SCR 20:1.18; see also Wisconsin Formal Op. EF-10-03, Conflicts Arising From Consultations With Prospective Clients; Significantly Harmful Information (Dec. 17, 2010).
33 SCR 20:1.18.
34 Wisconsin Formal Op. EF-10-03, supra note 32.
35 SCR 20:1.10.
36 SCR 20:1.10(b).
38 Berg, 141 Wis. 2d at 887.
39 Burkes, 165 Wis. 2d at 590-91.
40 Foley-Ciccantelli, 2011 WI 36, ¶¶ 113-14, 333 Wis. 2d 402.
42 Medina, 2006 WI App 76, ¶ 27, 292 Wis. 2d 453; State v. Tkacz, 2002 WI App 281, ¶ 15, 258 Wis. 2d 611, 654 N.W.2d 37.
43 Medina, 2006 WI App 76, ¶ 24, 292 Wis. 2d 453.
44 Id. ¶ 31.
45 Foley-Ciccantelli, 2011 WI 36, ¶ 97, 333 Wis. 2d 402.
46 ABA Comm. on Ethics & Prof’l Responsibility, Formal Op. No. 90-358.
47 See Nelson v. Green Builders Inc., 823 F. Supp. 1439 (E.D. Wis. 1993).