By Samson Habte
A judge acted prematurely when he booted Nixon Peabody LLP from a case based on its “incredibly brief” association with a conflicted lateral hire who worked on the other side of the litigation, a California appeals court held Jan. 26.
The ruling was a victory for Nixon Peabody’s client, which could avoid the costs of retaining new counsel to represent it in a complex case that began in 2013.
But the ruling could have broader significance. It appears to be the first California appellate decision to hold that a law firm that hires an attorney who has “switched sides” in litigation may—in narrow circumstances—avoid disqualification by erecting an “ethical screen” around the lawyer.
California is one of the 18 states that have not adopted a version of the ABA Model Rule that allows law firms to avoid disqualification by putting an ethical screen around conflicted lateral hires. And while some California appellate decisions have recognized screening as a way to avoid imputed disqualification, none of them have done so in scenarios involving a lawyer who switches sides in the same case.
But the court said the unusual facts in this case—in which Nixon Peabody was hit with a disqualification motion based on its hiring of a side-switching lawyer who worked at the firm “for an incredibly brief period, approximately five weeks"—compelled it to reject “an absolute rule of vicarious disqualification” even in the side-switching scenario.
“Individual assessment of the facts, rather than automatic disqualification, is a modern rule that better reflects the current realities of law firm life in the 21st century,” Justice Eileen C. Moore wrote. She quoted from another decision in which a court drew a comparison between lawyers and athletes:
The appellate panel instructed a trial judge to reassess its ruling disqualifying Nixon Peabody from a case it has handled since 2013 for the California Self-Insurers’ Security Fund.
The Fund is a nonprofit entity that pays workers’ compensation claims of self-insured companies that are unable to do so. The Fund is required to seek reimbursement from those self-insured companies, and in 2013 it hired Nixon Peabody to sue 304 of them.
In February 2017, Nixon Peabody hired Andrew Selesnick to work in its Los Angeles office. Selesnick previously worked at Michelman & Robinson LLP (M&R), which represented six of the companies that Nixon Peabody sued in the reimbursement litigation. Four of those companies had settled their claims, but the two that hadn’t moved to disqualify Nixon Peabody based on its hiring of Selesnick.
Selesnick left Nixon Peabody five weeks after he was hired. But the trial court said his departure wasn’t enough to save Nixon Peabody from vicarious disqualification. The trial court “concluded that when an attorney switches sides, disqualification is mandatory; no amount of ethical screening can save the representation,” the appellate panel said.
The appellate panel reversed. It said Nixon Peabody should be given an opportunity to show that its lawyers did not acquire confidential information about the defendants from Selesnick before he departed.
If such information was transmitted, “disqualification is required,” the panel said. But if the firm put up an ethical screen, the trial court “must exercise its discretion to determine whether other reasons compel disqualification,” the panel said.
“Automatically finding that Selesnick’s very short tenure at Nixon Peabody is sufficient to impute knowledge to the entire firm, including attorneys working on the matter in a different office, places form over substance,” Moore wrote.
The court said its rejection of automatic disqualification was compelled, in part, by the unusual facts of this disqualification dispute.
"[T]he facts in this case are significantly different from the typical ‘switching sides’ scenario,” Moore said.
“Selesnick was employed by Nixon Peabody for an incredibly brief period, approximately five weeks,” she wrote. “He worked in a different office at the firm from the attorneys who were actively involved in the instant matter. The firm took steps to isolate Selesnick from the case, and there was evidence before the court that no confidential information was shared. Further, at this stage of the case, the Fund would be substantially prejudiced if it had to hire new counsel and bring them up to speed.”
Justices Kathleen E. O’Leary and Raymond J. Ikola joined the opinion.
Arnold & Porter Kaye Scholer LLP represented Nixon Peabody. The defendants were represented by Michelman & Robinson LLP; Epps & Coulson LLP; Roxborough, Pomerance, Nye & Adreani LLP; The Law Office of Shafiel A. Karim P.C.; and Thomas G. Gehring & Associates P.C.
The case is Calif. Self-Insurers Sec. Fund v. Superior Court of Orange Cnty. , 2018 BL 26660, Cal. Ct. App., 4th Dist., No. G054981, 1/26/18 .
To contact the reporter on this story: Samson Habte in Washington at email@example.com
To contact the editor responsible for this story: S. Ethan Bowers at firstname.lastname@example.org
Copyright © 2018 American Bar Association and The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)