Dec. 1 — In the Fifth Circuit federal courts will depart from Texas law and allow law firms to rebut the presumption that a lawyer who formerly represented his new firm's opponent shared confidential information about the opponent with his new colleagues, the U.S. District Court for the Southern District of Texas ruled Nov. 14.
Judge Sam Sarks acknowledged that Texas does not allow firms to use screening or any other method to overcome the presumption of shared confidences within a firm. But Sarks said the Fifth Circuit has made clear that in federal litigation the presumption may be treated as rebuttable.
Applying a balancing approach, Sarks concluded that disqualification would be too severe in this case where the firm effectively screened the tainted lawyer from contact with his colleagues in the firm.
Sarks recognized that the district court's local rules require attorneys practicing before the court to comply with the Texas Disciplinary Rules of Professional Conduct.
But Fifth Circuit cases have made clear, he said, that motions to disqualify are substantive matters affecting the rights of the parties and are determined by applying standards developed under federal law, along with ethics rules announced by the national profession.
Therefore, Sarks said, “this Court, while it considers the Texas Rules and Texas case law as guidance, looks to Fifth Circuit precedent as controlling authority.”
Sarks said that under Fifth Circuit case law on former-client conflicts, a lawyer who has represented a client in a substantially related matter is conclusively presumed to have acquired client confidences in the prior matter.
In Texas, there is also an irrebuttable presumption that the personally conflicted lawyer will share those confidences with other members of his firm, Sarks said, citing In re Columbia Valley Healthcare Sys., LP, 320 S.W.3d 819, 26 Law. Man. Prof. Conduct 547 (Tex. 2010).
However, the Fifth Circuit has never specifically adopted this second presumption, Sarks noted. “[U]nder Fifth Circuit precedent, there is no established irrebuttable presumption a lawyer shares client confidences he possesses with other lawyers at his law firm,” he said.
In assessing Fifth Circuit law on this issue, Sarks relied heavily on Kennedy v. Mindprint (In re ProEduc. Int'l, Inc.), 587 F.3d 296, 25 Law. Man. Prof. Conduct 612 (5th Cir. 2009).
That case indicates, Sarks said, “that, to the extent there is still a presumption (which itself the ProEducation court called into question), the presumption is rebuttable.”
In the patent infringement litigation before the court, Omron Oilfield & Marine, moved to disqualify Raley & Bowick LLP from representing its opponent, National Oilwell Varco, after learning that Raley & Bowick had hired a lawyer, Brian Wunder, who at his former firm had represented Omron in matters related to this case.
Sarks found that Wunder indeed had an attorney-client relationship with Omron in substantially related matters at his former firm. Thus, Wunder was irrebuttably presumed to have acquired confidential information in the previous representation, and he would be disqualified in this case if he were the lawyer representing Omron's opponent, Sarks said.
However, Sarks said that under Fifth Circuit law, Raley & Bowick should be given a chance to rebut any presumption that Wunder shared Omron's confidences with other lawyers at Raley.
The factual record indicated that Wunder never worked on this patent suit while at Raley, never shared any of Omron's confidences with the attorneys there, and recently departed from the firm, the court said.
Moreover, the firm set up an ethics screen to separate Wunder from the litigation, Sarks observed. In a footnote, he acknowledged that Texas case law does not permit the presumption of shared confidences to be rebutted through screening mechanisms.
However, “The same is not true of Fifth Circuit law, and the Court considers these efforts to screen Wunder from the NOV/Omron litigation as part of the factual record,” Sarks said.
Sarks said he did not accept this evidence as dispositive but instead considered it as part of a “balancing approach” that he found to be “most prudent under Fifth Circuit guidance as a whole.”
Under this balancing approach, Sarks concluded that disqualification would be too severe a remedy when compared to the unidentified prejudice that Omron would suffer if Raley & Bowick remained as counsel for its opponent.
Requiring Raley's client to hire new counsel would delay the trial and impose great expense, and Omron did not explain what harm could result from the confidential information that Wunder possesses, Sarks said.
Raley & Bowick represented National Oilwell Varco. Foley & Lardner LLP and Graves, Dougherty, Hearon & Moody represented Omron.
Copyright 2014, the American Bar Association and The Bureau of National Affairs, Inc. All Rights Reserved.
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