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Screen Can't Stop Firm's Disqualification if New Hire Had Substantial Role in Matter

Thursday, December 27, 2012
By Joan C. Rogers

Law firms may not count on screening to escape imputed disqualification from an incoming lawyer's conflict of interest if the lawyer played a substantial role in the matter, the New Mexico Supreme Court held Dec. 6 (Roy D. Mercer LLC v. Reynolds, N.M., No. 33,830, 12/6/12).

Applying New Mexico's vicarious disqualification rule, which is more restrictive than ABA Model Rule 1.10, the court held that a firm handling a litigation matter could not rely on screening to avoid imputed disqualification when it hired a lawyer who had done legal research and attended strategy sessions while working for the other side at a different firm. The court also made clear that trial courts do not have equitable discretion to permit a firm's continued representation when ethics rules clearly prohibit it.

The opinion by Justice Richard C. Bosson fleshes out what it means for an incoming lawyer to have played a “substantial role” for an adversary in “the matter.”


“[A] firm may continue to represent a current client, if the newly-hired associate had only limited or peripheral involvement in the matter,and an effective screening process is in place.”

New Mexico Supreme Court

The court acknowledged that its decision may limit lawyers' lateral movement between law firms. But allowing lawyers to switch sides in litigation would be contrary to the public's expectation of undivided loyalty and at odds with traditional notions of fairness, it said.
Rule on Imputation
New Mexico Rule of Professional Conduct 16-110(C) provides that when a lawyer becomes associated with a firm, the firm may not knowingly represent a person in a matter in which that lawyer is disqualified under the rule on former-client conflicts, Rule 16-109.

In practice, the court explained, Rule 16-110(C) means that when a law firm hires a new associate, any conflict the associate has individually under Rule 16-109 is imputed to the entire firm.

Rule 16-110(C) provides two exceptions. The first is for situations in which “the newly associated lawyer has no information protected by Rule 16-106 [confidentiality] or 16-109 … that is material to the matter.”

Under this exception, the court explained, a firm may continue to represent a client if the incoming lawyer does not possess confidential information from a former client that is material to the current client's case. It is highly unlikely, Bosson said, that a lawyer who has a conflict under Rule 16-109 would not possess confidential information material to the current client's case.

Accordingly, the court continued, the analysis of imputed disqualification turns mostly on the second exception, which applies when “the newly associated lawyer did not have a substantial role in the matter,” the lawyer is timely screened and receives no part of the fee from the case, and written notice is promptly given to any affected former client.

Policy Choice
In other words, Bosson explained, “a firm may continue to represent a current client, if the newly-hired associate had only limited or peripheral involvement in the matter, and an effective screening process is in place.”

Screening can avoid the firm's disqualification, the court continued, only if the disqualified lawyer played no “substantial role” in the matter before changing firms. In that situation, imputation is removed, and consent to the new representation is not required. But if the earlier role was substantial, the lawyer's new firm is disqualified and no amount of screening can cure the imputed conflict, Bosson said.

The court pointed out that Model Rule 1.10 allows screening to remove a conflict so long as it is timely and former clients are given notice. “New Mexico's rule is more stringent than the ABA Model Rule in that screening is only permitted if the attorney did not play a substantial role in the matter or does not possess confidential information,” Bosson explained.

This variance from the ABA model “reflects a conscious policy choice to limit the instances in which screening can be used to remove a conflict,” the court said. It noted that Arizona, Colorado, Massachusetts, Nevada, and Ohio have all adopted rules similar to New Mexico's.

Lawyer Joined Opposing Firm
The disqualification issue grew out of litigation over a disputed railroad easement. When the lawsuit was removed to federal court, the party contesting the easement, Roy D. Mercer LLC, hired the Wagner Ford law firm to seek a remand to state court.

Lisa Ford was actively involved in getting the case remanded, and she stayed involved afterward until she left the firm about nine months later, the court said. Billing records indicated, it said, that Ford was involved in strategy meetings with Mercer and co-counsel and was active in investigative efforts, discovery, and communication with experts; she also attended court hearings but did not enter an appearance in the state court litigation, Bosson said.

Ford subsequently joined Riley, Shane & Keller, which was representing a railroad contractor, Gandy Dancer LLC, that was one of Mercer's opponents in the litigation. Mercer noticed Ford's new affiliation on the Riley firm's website, and complained about the conflict. The Riley firm filed a motion seeking judicial approval of a screening process that the firm believed would allow its continued representation of Gandy Dancer. Mercer moved for the firm's disqualification.

The trial court found that Ford had previously represented Mercer in the same or a substantially related matter, that her role was substantial, and that she therefore had a conflict of interest under Rule 16-109. The Riley firm violated Rule 16-110(C) by continuing to represent Gandy Dancer after hiring Ford, it ruled.

Balancing the equities, however, the trial court declined to disqualify the Riley firm; instead, the court ordered the firm to pay Mercer's attorneys' fees incurred in litigating the conflict issue, and suggested that Mercer could file a grievance against the firm.

'Substantial Role' in 'the Matter'
In reviewing those findings the supreme court determined what it means for a lawyer to have a “substantial role in the matter” under Rule 16-110(C). The way in which the term “matter” is used elsewhere in the ethics rules indicates, the court found, that the scope of “the matter” should be determined through a “fact-specific, transactional approach.”

Bosson said that the trial court apparently took a similar transactional approach when it focused on the federal court's finding that both the state court and the federal court proceeding arose out of the same “matter.” The trial court's finding that Ford played a substantial role “in the prior representation of Mercer” is the same as “the matter” for purposes of Rule 16-110(C), it decided.

Gandy Dancer argued that Ford's role in the matter was not substantial because her involvement was limited to briefing the issue of remand, she did not enter an appearance in the state court action, and she was not the lead attorney.

The court disagreed. “Substantial” means “'to [a] degree or extent [that] denotes a material matter of clear and weighty importance,'” Bosson wrote, quoting the definition of that word in the terminology rule. Ford clearly played a substantial role on behalf of Mercer in both the federal and state court actions in light of her attendance at strategy meetings and her key legal research, the court found.

Mandatory Disqualification
Bosson rejected the trial court's resort to equitable considerations in allowing the Riley firm to continue representing Gandy Dancer. Once the trial court found that Ford had access to confidential information and played a substantial role on the other side in the prior representation of Mercer, Rule 16-110(C) mandated disqualification of her new firm and the trial court had no discretion in the matter, Bosson declared.

In reaching this conclusion, the court pointed to the absolute nature of the wording of Rule 16-110(C), which states that a firm “may not” knowingly represent a client when a lawyer in the firm has a former-client conflict. “[T]he judge's equitable discretion cannot trump the plain language of a rule, especially when that rule concerns the duty of loyalty,” Bosson wrote. Moreover, the prospect of disciplinary action is not an adequate substitute for disqualification, he said.

Process to Follow
The professional conduct rules specify a clear process for firms to follow when they wish to hire lawyers with potential conflicts, the court said: They should contact opposing counsel to ascertain whether the prospective hire possesses confidential information material to a particular case or whether the lawyer played a substantial role. If the answer to either question is yes, they should ask the former client for a waiver of the conflict. A firm that cannot obtain a waiver proceeds at its own peril, Bosson warned.

The court asked its committee on professional conduct rules to study the best method for a trial court to determine whether a lawyer has played a substantial role in a matter without endangering the attorney-client privilege. Possible options include appointing a special master or ordering the challenged law firm to hire contract counsel, it suggested.

The court also asked the committee to study whether its rule on lawyer-client confidentiality should be revised to embrace the ABA's recent amendment to Model Rule 1.6 that allows disclosure for purposes of detecting and resolving conflicts of interest. See 28 Law. Man. Prof. Conduct 509.

Charles T. DuMars and Tanya L. Scott of Law & Resource Planning Associates in Albuquerque, N.M., represented Roy D. Mercer LLC. Attorney General Gary K. King and Assistant Attorney General Scott Fuqua, Santa Fe, N.M., represented the trial court.

Charles J. Vigil of Rodey, Dickason, Sloan, Akin & Robb and Mark J. Riley of Riley, Shane & Keller, both of Albuquerque, represented Gandy Dancer. BNSF Railway Co. was represented by Emily A. Franke and Rodney L. Schlagel of Butt, Thornton & Baehr, Albuquerque, and Paul T. Halajian of Modrall, Sperling, Roehl, Harris & Sisk, also of Albuquerque.


Full text at /uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/33830(1).pdf.

The ABA/BNA Lawyers’ Manual on Professional Conduct is a joint publication of the American Bar Association Center for Professional Responsibility and Bloomberg BNA.

Copyright 2012, the American Bar Association.

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