Effective November 1, 2018, California’s new rules of professional conduct now address imputation of conflicts of interest and permit ethical screening to avoid imputation under certain circumstances.
New rule 1.10 incorporates imputation concepts that are currently addressed in California case law. Subject to two limited exceptions, a conflict of interest of one lawyer in a law firm is imputed to all lawyers in the firm: “While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by [the current and former conflict of interest] rules . . . .”
The first exception does not impute conflicts based on the tainted lawyer’s personal interest that “does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm.” Rule 1.10 (a)(1). The second exception permits ethical screening for lateral lawyers to avoid the imputation of conflicts of interest under Rule 1.9 (former client conflicts) provided that: (i) the lateral lawyer did not substantially participate in the same or a substantially related matter; (ii) the lateral lawyer is timely screened and is apportioned no part of the fee from the matter; and (iii) written notice is promptly provided to the affected former client. Rule 1.10 (a)(2).
In contrast, the American Bar Association Model Rule 1.10 (a)(2) permits screening to avoid imputation even if the prohibited lawyer was substantially involved in the prior matter. “Screened” is defined as “the isolation of a lawyer from any participation in a matter,” which includes the timely implementation of adequate procedures to protect the affected client’s confidential information and to prevent other lawyers and staff from communicating with the tainted lawyer regarding the former matter. Rule 1.0.1(k). Imputation may be waived by obtaining informed written consent from the affected client under certain conditions. See Rule 1.7 (current client conflicts); Rule 1.10 (c).
California’s ethics rules are intended only for disciplinary purposes. A rule violation alone does not form the basis for civil liability (Rule 1.0 (b)(3), Cmt. ); however, California courts often look to California’s rules for guidance in deciding disqualification motions. Historically, California courts have found that where an attorney is disqualified, that attorney’s entire firm is disqualified regardless of the implementation of an ethical wall. However, courts have relaxed this automatic vicarious disqualification standard in certain circumstances, and have approved screening to rebut the presumption of imputed knowledge in the context of government lawyers, non-attorney employees, experts and expert firms. In Kirk v. First American Title Ins. Co. (2010) 183 Cal.App.4th 776, the Second District Court of Appeal found that imputation of conflicts may, in certain circumstances, be prevented in private sector lateral transfers through the use of timely and effective screening procedures. In addition to Rule 1.10, firms should also look to factors discussed in case law for guidance on implementing an effective ethical wall. See Kirk, supra, 183 Cal.App.4th at 810-813.
About the Author:
Sarah Banola is a partner at Cooper, White & Cooper where she concentrates her practice in the areas of professional responsibility, employment law and regulatory law. She is the immediate past chair of the Bar Association of San Francisco’s Legal Ethics Committee. She is also a contributing editor to the professional responsibility chapter of the California Practice Guide on Employment Litigation and the legal malpractice chapter of the California Practice Guide on Claims and Defenses, published by the Rutter Group.