Ethics Corner: Disclosure of Client Information When Lawyers Move Between Firms
In November 2012, the NH Bar Association Ethics Committee published a commentary on the importance of timely pre-employment conflict screenings under Rule 1.10 when hiring a "lateral" attorney from another firm. This article addresses the more difficult issue that arises with regard to the disclosure of client information for purposes of detecting and resolving conflicts before hiring decisions are finalized.
The American Bar Association has already offered detailed guidance on the various issues of disclosure of client information when lawyers move between law firms. See ABA Opinion 09-455 (Oct. 8, 2009).
First, the opinion noted that as a general matter, limited disclosure of client information is permissible at an appropriate time during the process when a lawyer is considering moving between firms in order to detect and resolve conflicts. The premise behind permitted disclosure was to protect clients and former clients of both the lateral and the new firm from situations where disqualification might occur due to a move. It acknowledged a tension between the confidentiality and conflicts of interest rules, but resolved it in favor of avoiding disqualification of a client’s chosen lawyer or firm, where possible.
Second, the opinion noted three important principles governing disclosure:
Disclosure should be no greater than reasonably necessary to accomplish the purpose of detecting and resolving conflicts.
Disclosure must not compromise attorney-client privilege or otherwise prejudice a client or former client.
The recipients of such information at the potential new firm may not reveal the information or use it for any purpose other than detecting and resolving conflicts of interest.
There are several issues that arise in the process of disclosure, including (1) what can be disclosed, (2) whether the lateral must seek client consent to disclose, and (3) the timing of such disclosure.
What Can Be Disclosed?
In the first instance, the opinion suggests that the disclosure of client names, without more, is usually effective in determining the existence of most of the possible conflicts. Beyond that, a disclosure of the issues involved, the parties who are not clients/former clients but are deeply involved in a matter, and whether the matter has terminated, may occur as a next step, if the conflict is not obvious after disclosure of client names.
In instances where it is necessary to determine whether there is a substantial relationship between matters for purposes of determining whether a conflict exists with a former client of the firm from which the lawyer is considering moving, a more intensive factual analysis, and thus, a more detailed disclosure, may be needed.
Is Client Consent Required?
The opinion also determined that client consent to the disclosure of such information is not necessary. It stated that pursuing client consent to disclosure was impractical and would have "unpredictable and possibly adverse consequences" in that it could give a client or former client the power to prevent lawyers from moving between firms. However, if the disclosure of such information involved the compromise of the attorney-client privilege, or would otherwise prejudice a former or current client of the firm that the lateral is leaving, then informed consent from that client/former client is required.
Some examples where consent would be required were cited by the ABA in a comment to a proposed rule change, discussed below. They include the fact that a corporate client is seeking advice on a corporate takeover that has not been publicly announced; that a person has consulted a lawyer about the possibility of divorce before the person’s intentions are known to the person’s spouse; or that a person has consulted a lawyer about a criminal investigation that has not led to a public charge.
When Should Such Disclosures Occur?
Timing of such disclosures is also important. The ABA opinion noted that the disclosure of client information should not occur until the lateral and the prospective firms have engaged in substantive discussions regarding the possibility of a new association. This is consistent with this committee’s previous commentary, which emphasized that it is improper to wait until the lateral begins work at the new firm to analyze possible conflicts and institute screening.
There is no fixed or set time within the employment negotiation when such disclosures should be made. The opinion observed that negotiations must have moved beyond the initial stage and progressed to a point where a conflicts analysis is reasonably necessary. However, it noted that the point of disclosure may occur at different times, depending on whether the firm is hiring a new associate with little experience and few clients, versus a partner-level lawyer with a multitude of clients.
An Alternative to Disclosure to the Potential New Firm
As a helpful suggestion to those concerned about disclosure to the potential new firm, the opinion also suggested the lateral and the new firm might hire an independent intermediary lawyer to receive and analyze conflict information in confidence. In doing so, such a procedure would comply with the rules governing client confidentiality, which permit disclosure of protected information to secure legal advice about a lawyer’s compliance with the rules. See NHRPC 1.6(b)(2). The intermediary lawyer would then be able to advise one or both parties of any detected conflicts without revealing confidential information.
Direct Guidance in Professional Conduct Rules
In August 2012, the ABA’s House of Delegates voted to adopt an amendment to Model Rules of Professional Conduct Rule 1.6 to address the issue of disclosure of client information in lateral hiring. That amendment, which is under study by the Ethics Committee for possible recommendation of adoption by the New Hampshire Supreme Court, states as follows (new text in bold):
Rule 1.6 Confidentiality
(a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).
(b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary: …
(7) to detect and resolve conflicts of interest arising from the lawyer’s change of employment or from changes in the composition or ownership of a firm, but only if the revealed information would not compromise the attorney-client privilege or otherwise prejudice the client.
The ABA comments, which have not been officially adopted by our court in the past, but which are included to provide guidance, emphasize the principles set forth in this article. Those comments, in pertinent part, provide as follows:
"Paragraph (b)(7) recognizes that lawyers in different firms may need to disclose limited information to each other to detect and resolve conflicts of interest, such as when a lawyer is considering an association with another firm, two or more firms are considering a merger, or a lawyer is considering the purchase of a law practice. (Citation omitted). Under these circumstances, lawyers and law firms are permitted to disclose limited information, but only once substantive discussions regarding the new relationship have occurred. Any such disclosure should ordinarily include no more than the identity of the persons and entities involved in a matter, a brief summary of the general issues involved, and information about whether the matter has terminated …(T)he disclosure of any information is prohibited if it would compromise the attorney-client privilege or otherwise prejudice the client …Under those circumstances, [Rule 1.6(a)] prohibits disclosure unless the client or former client gives informed consent.
"… Paragraph (b)(7) does not restrict the use of information acquired by means independent of any disclosure pursuant to paragraph (b)(7). Paragraph (b)(7) also does not affect the disclosure of information within a law firm when the disclosure is otherwise authorized, see Comment , such as when a lawyer in a firm discloses information to another lawyer in the same firm to detect and resolve conflicts of interest that could arise in connection with undertaking a new representation."
Disclosure of client information is permissible during the process when a lawyer is considering moving between firms as long as certain limitations are recognized. Any disclosures should be no greater than reasonably necessary to accomplish the purpose of detecting and resolving conflicts and they must not compromise attorney-client privilege or otherwise prejudice a client or former client.
The Ethics Committee provides general guidance on the NH Rules of Professional Conduct and publishes brief commentaries in the Bar News. New Hampshire lawyers may contact the Ethics Committee for confidential and informal guidance on their own prospective conduct or to suggest topics for Ethics Corner commentaries by emailing Rosemarie Atwood.
Bar members can find Ethics Committee opinions and articles at www.nhbar.org. Ethics Committee materials are searchable in the Casemaker Library.