Transcript Conflicts and the Duty to Supervise for In-House

Conflicts and the Duty to
Supervise for In-House
Counsel
Brian McCormac
BrownWinick
666 Grand Avenue, Suite 2000
Des Moines, IA 50309-2510
Telephone: 515-242-2431
Facsimile: 515-323-8531
E-mail: [email protected]
Agenda
• Conflicts Issues in Corporate Law
Departments
• Overseeing the Work of Others
Conflicts in Corporate Law
Departments
• Iowa’s Rules of Professional Conduct expressly
include corporate law departments in the
definition of “firm”
• “For purposes of the Iowa Rules of Professional
Conduct, the term ‘firm’ denotes lawyers in a law
partnership, professional corporation, sole
proprietorship . . . or lawyers employed in the
legal department of a corporation or other
organization.” Iowa R. Prof. Conduct 32:1.0(c).
Conflicts in Corporate Law
Departments
• How do the conflicts rules apply to in-house
attorneys?
– Joint representation of corporation and its officers,
directors, shareholders, or employees
– Representation of subsidiaries
– When lawyers move to/from corporate law
departments
• From private practice
• From other corporate law departments
• From government
– Interactions with former clients
Conflicts in Corporate Law
Departments—Who is the Client?
• Who is the client?
– Most issues arise in two contexts
• Joint representation of corporation and its
employees, directors, or shareholders
• Representation of a subsidiary
Conflicts in Corporate Law
Departments—Who is the Client?
• Rule 32:1.13
– makes clear that the client is the organization
– Does not prohibit joint (or separate) representation of
organization and its constituents, provided that there is no
conflict under Rule 32:1.7
– Requires lawyer to deliver “Miranda warning” to constituent
explaining that the organization is the client when the lawyer
knows/should know the constituent’s interests are adverse to
those of the organization
– Be careful to protect attorney-client privilege in joint
representations
• Joint representation privilege
• Best practice to retain separate counsel for employees when
interests could be potentially adverse to organization
Conflicts in Corporate Law
Departments—Who is the Client?
• Representation of Subsidiaries
– Generally no problems when representation of the subsidiary
aligns with the interest of the parent company or if the subsidiary:
• Is wholly-owned by the parent,
• Has common directors with the parent, or
• A single legal department administers legal services for both entities
– If the interests of the parent and subsidiary are not aligned,
separate counsel should be retained for the subsidiary
• Contract negotiations between parent/subsidiary
• Insolvency of subsidiary (may require management for benefit of
creditors)
• Insured claims
Conflicts of Interest-Generally
• Conflict rules apply to lawyers within a “firm”,
defined to include “lawyers employed in the
legal department of a corporation or other
organization.” Iowa R. Prof. Conduct 32:1.0(c).
• Conflict rules apply to both former and current
clients. Iowa R. Prof. Conduct 32:1.7-32:1.9.
• Conflicts of interest can be imputed to lawyers
practicing together in a law firm or corporate law
department. Iowa R. Prof. Conduct 32:1.10.
Conflicts of Interest
Current Clients
• Governed by Rules 32:1.7, 32:1.8
• Prohibits dual representation if a
“concurrent conflict” exists
– Two situations:
• “direct adversity”: representation of one client will
be directly adverse to another client
• “material limitation”: significant risk that the
representation of a client will be materially limited
by a lawyer’s responsibilities to another client,
former client, or a third party, or by a personal
interest of the lawyer
Conflicts of Interest
Current Clients
• Conflict can be waived by client”
– If consent is written
– If representation is not contrary to law
– If representation does not involve two clients
adverse in litigation
• In no event can a lawyer represent both
parties in dissolution of marriage
proceedings.
Conflicts of Interest
Former Clients
• Governed by Iowa R. Prof. Conduct 32:1.9
• Prohibits:
– lawyer from representing a former client with interests materially
adverse to a former client if the lawyer represented the former
client in the same or a substantially related matter
– Lawyer from knowingly representing a former client of a firm with
which the lawyer was formerly associated, if the firm represented
the former client in the same or a substantially related matter and
the lawyer acquired material, confidential information about the
former client
– Lawyer may not (a) reveal confidential information about the
representation of the former client or (b) use such information to
the disadvantage of the former client
Conflicts of Interest
Former Clients
• Common Issues:
– Can former client consent to the representation or use
of confidential information? Yes, if in writing.
– What is a “substantially related” matter?
• Comments to Rule provide guidance:
– Involves the same transaction or legal dispute
– Substantial risk that confidential factual information normally
obtained in former representation would materially advance the
other client’s interest in the subsequent matter
– Passage of time can eliminate conflict, for example, confidential
information may have become obsolete or generally known
• Points 2 and 3 are highly fact-specific; advisable to avoid
close calls.
Conflicts of Interest
Imputation of Conflicts
• Rule 32:1.10 governs imputed conflicts of interest
– A firm may not knowingly represent a client if any individual
attorney in the firm would be barred from doing so, unless:
• The conflict is based on the attorney’s personal interest and does
not present a significant risk of materially limiting the representation
of the client by other lawyers in the firm (example, political beliefs)
– Firm may represent a person with interests materially adverse to
those of a client represented by a departed lawyer, if:
• Such client is not currently represented by the firm
• The matter is not the same or substantially related to matters in
which the departed lawyer represented the client
• No lawyer remaining in the firm has confidential information of the
former client that is material to the matter
Conflicts of Interest
Imputation of Conflicts
• Issues:
– What does the knowledge requirement in 32:1.9(b) and 32:1.10
mean?
• Defined in Rule 32:1.1 as “actual knowledge.”
• However, Comment 3 to Rule 32:1.7 provides that “[t]o determine
whether a conflict of interest exists, a lawyer should adopt
reasonable procedures, appropriate for the size and type of firm and
practice, to determine in both litigation and non-litigation matters the
persons and issues involved.”
• “Ignorance caused by a failure to institute such procedures will
not excuse a lawyer’s violation of this rule.”
• ABA Formal Opinion 09-455 (“When a lawyer moves between law
firms, both the moving lawyer and the prospective new firm have a
duty to detect and resolve conflicts of interest”)
Conflicts of Interest
Imputation of Conflicts
• Issues:
– Conflict can be waived by obtaining consent
in writing
• If representation is not contrary to law
• If representation does not involve two clients
adverse in litigation or dissolution proceedings
– Nonlawyer conflicts are not imputed.
However, majority rule requires screening
nonlawyers from participating in matters that
would be a conflict for an attorney
Conflicts of Interest
Government Attorneys, Judges
• Rules 32:1.11 and 32:1.12 govern conflicts relating to former
government attorneys and judges
• Such attorneys cannot represent a client in connection with a matter
in which the attorney personally and substantially participated in as a
government employee or judge, without written consent
• Members of a firm associated with a lawyer disqualified under the
above provision may not knowingly represent a client in the matter
unless:
– Disqualified lawyer is screened and receives no portion of fee
– Notice is given to the government agency or, in the case of a former
judge, the parties to a litigation matter
• Lawyers having confidential government information about a person
acquired during government service may not represent clients in a
matter in which such information could be used to the material
disadvantage of such person
Conflicts of Interest
Examples
• Traditional firm context:
– Lawyer moving from one firm to another
• Typical practice:
– List of clients the lawyer believes may follow
– Lawyer discloses clients of previous firm on whose
matters she worked or has material information
– Firm determines whether lawyer has material information
about the other side of a firm matter
– Conflicts analysis and screening
– In the event of a conflict, comply with 32:1.10
relating to imputed conflicts.
Conflicts of Interest
Examples
• Same issues exist in moves to and from a
corporate law department:
– Lawyer moving from one law department to
another
– Lawyer moving from private practice to law
department
– Lawyer moving from a law department to
private practice
Conflicts of Interest
Best Practices
• Keep a list of matters and adverse parties in
transactional and litigation matters involving the
company
• Keep a similar list for affiliates
• Good idea to keep this information for a few years, to
help identify risks relating to confidential information
• Request information from lateral candidates and conduct
ethical screening
• Be particularly careful when hiring lateral candidates
from competitors or their outside counsel
– Consent less likely than with conflicts arising from an isolated
transaction or litigation matter
Overseeing the Work of Other
Lawyers
• Rule 32:5.1 sets forth the responsibilities of
supervising lawyers
• partners in a law firm and lawyers with
comparable managerial authority in a law
department “shall make reasonable efforts to
ensure that the firm has in effect reasonable
measures giving reasonable assurance that all
lawyers in the firm conform to the Iowa Rules of
Professional Conduct.” Iowa R. Prof. Conduct
32:5.1(a).
Overseeing the Work of Other
Lawyers
• Comment 1 makes clear that this rule applies to lawyers
having partner-like authority in a law department or
government agency
• Comment 2 explains that “measures giving reasonable
assurance that all lawyers in the firm” comply with IRPC
includes establishing procedures to:
– Detect and resolve conflicts of interest
– Identify deadlines in pending matters
– Ensure that inexperienced lawyers are adequately supervised
• Other measures may be required depending on the
structure and nature of the law department, examples:
– Confidential referral system for ethical issues
– Ethics training
Overseeing the Work of Other
Lawyers
• A lawyer with direct supervisory authority
over another lawyer must make
reasonable efforts to ensure that the other
lawyer conforms with the IRPC
• Iowa R. Prof. Conduct 32:5.1(b)
Overseeing the Work of Other
Lawyers
• Under Rule 32:5.1(c), a lawyer is
responsible for another lawyer’s violation
of the IRPC if:
– The lawyer orders or knowingly ratifies the
conduct
– The lawyer has managerial authority or direct
supervisory authority, knows of the conduct at
a time when consequences can be avoided or
mitigated but fails to act
Overseeing the Work of
Non-Lawyers
• Rule 32:5.3 governs attorney supervision
of nonlawyers
• Requirements for the supervision of nonlawyers are parallel to the requirements for
the supervision of subordinate attorneys
Overseeing the Work of
Non-Lawyers
• partners in a law firm and lawyers with
comparable managerial authority in a law
department “shall make reasonable efforts
to ensure that the firm has in effect
reasonable measures giving reasonable
assurance that [the non-lawyer’s] conduct
is compatible with the professional
obligations of the lawyer.” Iowa R. Prof.
Conduct 32:5.3(a).
Overseeing the Work of
Non-Lawyers
• A lawyer with direct supervisory authority
over the nonlawyer must make reasonable
efforts to ensure that the nonlawyer’s
conduct is compatible with the
professional obligations of the lawyer
• Iowa R. Prof. Conduct 32:5.3(b)
Overseeing the Work of
Non-Lawyers
• Under Rule 32:5.3(c), a lawyer is
responsible for conduct of a nonlawyer
that would be a violation of the IRPC if
done by an attorney, if:
– The lawyer orders or knowingly ratifies the
conduct
– The lawyer has managerial authority or direct
supervisory authority, knows of the conduct at
a time when consequences can be avoided or
mitigated but fails to act
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