Ethics for New Lawyers: Ethics and the Potential New Client: Recent Developments in Protecting Your Firm from Disqualification

On By krobinson

Ethics for New Lawyers: Ethics and the Potential New Client: Recent Developments in Protecting Your Firm from Disqualification

By Charles V. Berwanger
Gordon Rees Scully Mansukhani

The purpose of this article is to highlight Rule of Professional Conduct 1.18 and its provisions regarding a lawyer’s communications with a prospective client, the risks and consequences of disclosing confidential information with resultant disqualification of an attorney, and the means available to prevent the disqualification of that attorney’s firm if the would-be client does not retain the lawyer or law firm.

American Bar Association Formal Opinion 510, issued on March 20, 2024, and entitled “Avoiding the Imputation of a Conflict of Interest When a Law Firm Is Adverse to One of its Lawyer’s Prospective Clients,” gives substantial guidance on avoiding the disqualification of a disqualified attorney’s firm. The opinion provides guidance to attorneys on the meaning of the discussed provisions of Rule 1.18.

RULE 1.18

Rule 1.18, entitled Duties to Prospective Clients[1], gives effect to Business and Professions Code section 6068(e) and Rule 1.6 in the context of an attorney interacting with a prospective client, the potential for confidential matters being disclosed, and the impact of such a disclosure on the attorney’s ability to represent an existing client or future client in a related matter. In sum, Section 6068 and Rule 1.6 mandate that it is the duty of a lawyer “to maintain inviolate the confidences, at every peril to himself or herself and to preserve the secrets, of his or her client.” The disclosure of such confidential matter generally precludes the attorney, whether or not an attorney-client relationship is established with the prospective client, from representing another client in a related matter.

However, the lawyer’s firm is not disqualified from representing “a client with interests materially adverse to those of a prospective client,” if (1) both the affected client and prospective client have given their informed written consent, or (2) the lawyer who received the information takes “reasonable measures” to avoid the exposure of more information than was reasonably necessary to determine whether to represent the prospective client; and (i ) the prohibited lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom; and (ii) written notice is promptly given to the prospective client to enable the prospective client to ascertain compliance with the provisions of this rule.

ABA FORMAL OPINION 510

This opinion is encyclopedic in its discussion of the issues which a lawyer should be concerned about when performing his or her due diligence regarding a prospective client. Its primary focus is on the meaning of the phrase “reasonable measures” to avoid the imputation of a conflict of interest under rule 1.18. 

First, the information sought should relate to “whether to represent the prospective client” which includes information relating to (1) whether the lawyer may undertake or conduct the representation (e.g., whether a conflict of interest exists, whether the lawyer can conduct the work competently, whether the prospective client seeks assistance in a crime or fraud, and whether the client seeks to pursue a nonfrivolous goal), and (2) whether the engagement is one the lawyer is willing to accept. The opinion explains that to avoid the imputation of a conflict, even if information relates to “whether to represent the prospective client,” the information sought must be “reasonably necessary” to make this determination. To avoid exposure to disqualifying information that is not “reasonably necessary” to determine whether to undertake the representation,” the lawyer must limit the information requested from the prospective client and should caution the prospective client at the outset of the initial consultation not to volunteer information pertaining to the matter beyond what the lawyer specifically requests.

The opinion recognizes that “failing to take ‘reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client’ is not misconduct.” Necessarily, lawyers may seek to learn a great deal of detail regarding the potential representation that goes far beyond what is reasonably necessary to determine whether to take on the representation. The risk is that doing so not only may result in the disqualification of the lawyer, but also the imputation of that disqualification to other attorneys in the same firm.

Pivotal to whether or not the elicited information is “reasonably necessary” is whether or not it relates to “whether to represent a prospective client.” The opinion suggests that questions meant to elicit information necessary to ensure that the representation would not raise potential ethical issues, and that the representation is consistent with the lawyer’s professional responsibilities, are reasonable. The second category of issues relates to whether or not taking the matter is consistent with sound business practices. That necessarily triggers a determination of the issues, the parties, the potential expense, the likelihood of compensation, the competency of the lawyer regarding the matter, and a myriad of other factors. Therein lies the potential for the disclosure of “confidential information and the risk of disclosure of ‘confidential’ information.” 

PERFECTING A SAFE HARBOR FOR THE FIRM.

Assume a lawyer who interfaces with a prospective client engages in the due diligence “reasonably necessary” to decide whether to represent the prospective client, and that confidential information is disclosed. Although that lawyer may be disqualified from the representation, the lawyer’s firm is not necessarily disqualified. 

Firm disqualification will not occur under Rule 1.18 if (1) the affected client and the prospective client give informed written consent to a conflict waiver; or (2) the prohibited lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom; and written notice of the foregoing palliative measures is given to the prospective client to enable the prospective client to ascertain compliance with the provisions of Rule 1.18.

Formal Opinion 510 provides substantial guidance to firm attorneys who undertake to interview prospective clients on ensuring that if confidential information is disclosed, such disclosure is done only in the context of being “reasonably necessary” to determine “whether to represent the prospective client.” This approach is intended to protect the firm from disqualification.

It should be noted that, although not discussed in Opinion 510, an attorney interviewing a prospective client will be well advised to make it clear at the outset — both orally and in writing — that there is no attorney-client relationship established by the interview process; to advise the prospective client that confidences are not to be disclosed; and to advise the prospective client to limit his or her answers to specific questions asked so the attorney has some control over any disclosures.

[1] Formal Opinion 510 refers to and discusses ABA Model Rule 1.18, which differs from Rule 1.18 of the California Rules of Professional Conduct that applies to California licensed attorneys. However, much of the analysis and commentary included in Formal Opinion 510 is instructive when applying Rule 1.18 of the California Rules of Professional Conduct