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March 7 --Where a lawyer represents a client against a former corporate client in the same type of case that she previously handled for the entity--or even in a different type of case--the former client may claim that the lawyer has confidential “inside” information that can be used to its disadvantage in the current representation, such as knowledge of the former client's litigation strategies and internal decision-making.
In these so-called “playbook” conflicts, a lateral hire purportedly knows a former client's thoughts and processes so well that any future engagements against that client are forbidden. These types of conflicts are inherently vague, difficult to recognize and carry potentially enormous economic consequences in lost fees and business, according to a March 7 panel discussion at the 2014 Legal Malpractice & Risk Management Conference in Chicago.
The conference, presented March 5-7, is sponsored primarily by Hinshaw & Culbertson LLP. Bloomberg BNA is a co-sponsor.
At the session on “'Playbook' Disqualifications,” general counsel from two law firms gave the audience an inside look at their own playbooks for analyzing and dealing with these troublesome conflicts. The discussion was moderated by J. Richard Supple of Hinshaw's New York office. Topics included the murky and ever-evolving definition of a disqualifying playbook conflict, unearthing potential playbook conflicts in the lateral hiring process and options for addressing a developed playbook conflict.
For a judicial definition of playbook knowledge, Supple pointed to this statement in In re N. Am. Deed Co., 334 B.R. 443, 454 (Bankr. D. Nev. 2005):
[T]he heart of this concept is possession of extensive and relevant information about a client obtained directly or as a byproduct of confidential communications, or at least through communications that would not have been made if the client had known that the law firm would be able to use the information against the client in later litigation. Subsequent use of that information could thus give the law firm an unfair advantage over the former client based in no small part on exploitation of these fruits of confidential communications.
A playbook conflict is a species of former-client conflict, but courts don't make a rigorous comparison of the current and former representations as they do for most former-client conflicts, Supple said.
Panelist Michael J. Silverman said “there's less of a methodology for figuring out the playbook conflict” than for other conflicts between former and current matters. The hardest part of analyzing these conflicts, he said, is that “the case law is all over the board.” Silverman is general counsel of Duane Morris LLP in Chicago.
To flesh out the concept of a playbook conflict, Supple posited a hypothetical lawyer Smith who practiced with the Decent law firm. Smith helped form a company XYZ and then spent 50 percent of her time from 2005-2009 representing the company in gender discrimination matters. During that time Smith formulated XYZ's aggressive defense policies, but her representation of the company ended in 2009. Does she have playbook knowledge? Supple asked.
In regard to discrimination cases, it's likely she would have playbook knowledge, Silverman said, but the question is how long a court would find that information to be useful.
What factors or touchstones are considered in determining whether a lawyer knows playbook information? Supple asked.
James P. Flynn, general counsel of Epstein Becker & Green P.C. in Newark, N.J., said “the key is the level of detail.”
It's not enough simply to know that a company wants to be aggressive in litigation. “That's like saying a coach likes to blitz,” he said. Rather, he said, “you need to know where the coach will put the safety” and other specific defensive strategies.
So there has to be a playbook, not just generalized knowledge, Supple said. To illustrate this point, he brought up Khani v. Ford Motor Co., 2013 BL 112916, 155 Cal. Rptr.3d 532, 29 Law. Man. Prof. Conduct 259 (Cal. Ct. App. 2013), where an order disqualifying plaintiff's counsel in a lemon law suit was overturned because the defendant did not show that it had “policies, practices, or procedures” generally applicable to evaluate, settle or litigate lemon law cases.
Silverman said that if a lawyer handled 10 cases about different things for the former client, he would not have disqualifying playbook knowledge. He mentioned an unpublished and nonprecedential California case, Patrón Spirits Int'l AG v. Singh, No. B234187 (Cal. Ct. App. Feb. 21, 2013), which concluded that general knowledge of corporate strategy was not enough for disqualification.
As an example of a case disqualifying a lawyer for playbook knowledge, the conference materials cite Childress v. Trans Union, LLC, No. 12-cv-00184 (S.D. Ind. April 30, 2013), which involved an attorney who formerly represented the client in 150 matters involving the same statutory provisions at issue in the current case.
Flynn said one question in analyzing an alleged playbook conflict is whether it's the lawyer's playbook or the client's. If it is the lawyer's strategy, he said, it's not playbook knowledge.
Similarly, he said, if the client's strategy changes when it retains a different lawyer, or if cases are being handled differently now, the lawyer's knowledge shouldn't be disqualifying. For example, if the old playbook was the flying wedge, that's no longer relevant, he said, referring to an offensive football play that has been outlawed.
Another question, Flynn said, is what type of case the current matter involves. “If we're playing basketball now, a football playbook isn't relevant,” he told the audience.
It also matters, Silverman said, whether the former client's current decision-makers are the same individuals as when the supposedly conflicted lawyer was representing the former client.
Supple said that according to some case law the former representation underlying the alleged playbook conflict could have ended years ago.
As an example, he cited SHFL Entm't, Inc. v. DigiDeal Corp., 2013 BL 13253, No. 2:12-cv-01782-GMN-VCF (D. Nev. Jan. 16, 2013), which rejected the argument that a representation ending five years previously was too remote to implicate “anything of a confidential nature.”
Silverman said he found it somewhat surprising to think that lawyers would typically remember detailed information about a former client from five years ago. But the continuing relevance of information can vary according to industry, he said. SHFL was an intellectual property case, and “the playbook isn't as likely to change” in that type of case, he said.
SHFL suggests, Supple said, that some courts may be generous in their view of how long information matters in an alleged playbook conflict.
In the hypothetical under consideration, Smith moves to Mega firm in 2013. Mega's lateral questionnaire asked for engagements going back three years. Smith's representation of XYZ ended more than three years previously, so she did not disclose it.
Was this a good conflicts check? Supple asked.
Silverman said that most firms do something similar, looking back three to five years. While it would be great to ask about representations spanning the previous five or seven years, it's hard to get lawyers to go back even one year, he said.
“Catching whether there's potential for a playbook conflict is really difficult,” Silverman commented.
Silverman said his firm looks out for situations in which a lateral lists 10 to 20 matters for a particular client. While that's the type of lawyer a firm wants as a lateral, that person is also more likely to have playbook knowledge, he said.
Silverman also suggested asking about the subject matter of each former engagement. We pay special attention to whether the representation involved a practice area where knowledge tends to stick around for a long time, such as intellectual property or trusts and estates, he said.
Pay special attention to former in-house counsel, Silverman said, because there is a much higher risk of a playbook conflict if you end up suing an in-house lawyer's former client. In particular, these conflicts may show up when bringing in intellectual property lawyers who have worked in-house, which appears to be a common career path, he said.
An ABA opinion on conflicts of former in-house lawyers has a lower standard on this question, Silverman said, referring to ABA Formal Ethics Op. 99-415, 16 Law. Man. Prof. Conduct 123 (1999).
According to that opinion, an in-house lawyer who moves to a law firm is not necessarily barred from representing new clients whose interests are materially adverse to those of the lawyer's former employer merely because the lawyer represented his former employer in similar types of matters or gained a general knowledge of the employer's strategies, policies or personnel.
Suppose that Smith's potential playbook knowledge is noted in Mega's conflicts check when it hires her, and later another Mega lawyer wants to accept a new matter adverse to Smith's former client. How is this potential conflict resolved internally? Supple asked.
Flynn said the potential conflict would not be treated differently from other conflicts. If every problem like this hit general counsel's desk at the outset, general counsel would not be able to do anything else, he said.
On the other hand, Flynn said there should be a reporting mechanism about the resolution the lawyers reach. If they can't agree, their dispute will naturally bubble up to general counsel, he said, but from a risk management point of view a bigger problem is presented when the lawyers agree to bring in a client despite a potential conflict. For this reason Flynn said he instituted a policy directing that he must be notified about agreements resolving an internal dispute about a potential conflict, not just disagreements.
Silverman said that a big part of the conflicts process is educating lawyers and making sure they understand the landscape of playbook conflicts.
Colleagues need to be educated, he said, that if they see this kind of issue, they must get someone else involved to deal with the problem and not keep talking, so there's less of an issue about transfer of playbook knowledge. In this hypothetical, he said, the two lawyers should not have a long lunch discussing what Smith might have done for her former client.
Flynn agreed that “it's an ongoing educational process.” Lawyers may not know what a playbook conflict is, and “some of them have never seen a conflict,” he said, prompting chuckles from the audience.
Silverman said his firm has taken conflict clearance away from the lawyers who would staff the client's matter. We have other lawyers who clear the conflicts--“and we have other things for them to do so they don't kill themselves,” he said with a smile.
In the final permutation of the panel's hypothetical, Smith joins the Mega firm and later Jones--a Mega partner who knows nothing about the potential playbook conflict--agrees to represent a group of former XYZ executives who are forming a competing business. XYZ retains the Decent firm and commences a declaratory judgment action against the former executives and their new business. When Jones files a notice of appearance for the defendants, XYZ and Decent believe the Mega firm has a disqualifying conflict because of Smith's playbook knowledge.
If you're at Smith's former firm now representing XYZ, what would you do at this point? Supple asked.
Flynn said that at his firm a lawyer who wants to make a motion seeking sanctions or bring any action against an attorney must get clearance from senior management--that is, from general counsel.
Flynn said if he were general counsel at Smith's former firm he would consider whether the current client XYZ is the one demanding that Mega should be removed as counsel, or whether the litigator handling the case raised the idea. Ultimately the firm will have to rely on the client to establish that there is a playbook conflict, and the case for disqualification won't be strong if the idea was planted by the litigator, he said.
Flynn said he also considers:
• Does the law justify or support the motion? “That's a tough call because the courts are divided,” he said.
• Will the motion help achieve the client's short-term goals?
• Will the client's interests be compromised beyond the present litigation if disqualification is pursued?
• What are the firm's interests? Do we want to do this as a firm?
Flynn said he usually talks to the litigator, who sometimes asks him to meet with the client. Sometimes the client is upset about the playbook conflict and the litigator doesn't want to be the one to say no to the idea of seeking disqualification, he said.
Flynn also said he tends to talk with the client in this situation because “there can be collateral damage” from pursuing the motion for disqualification. If the firm is reluctant to pursue it, he can explain to the client that the firm's position on the issue is consistent with the reasons why the client picked the firm in the first place, he said.
Supple pointed out there is a possibility of a limited waiver of privilege if the former client presses for disqualification, according to Radware, Ltd. v. A10 Networks, Inc., 2014 BL 4183, No. C-13-02021-RMW, 30 Law. Man. Prof. Conduct 72 (N.D. Cal. Jan. 8, 2014).
Radware held that a limited implied privilege waiver will result if a plaintiff insists on submitting privileged materials for in camera review in support of its motion to disqualify the opponent's law firm on the basis of an alleged conflict of interest.
Assuming that the Decent firm concludes there is enough to go forward with the motion, what approach should it take? Supple asked. Contact the other side informally, approach them but follow up with a disqualification motion or just go ahead and file the motion?
Flynn said that he generally prefers an informal approach, such as calling the other side's managing partner or general counsel.
Silverman said he would file the disqualification motion as a first step only when there was intense time pressure and the lawyer in question had a very high level of knowledge along with a huge potential for winning the case.
Flynn agreed with seeking disqualification in that type of situation, such as in an intellectual property case where the other side is seeking a temporary restraining order to stop the client's product. You may disserve your client, he said, if you go through the hearing on the temporary restraining order and then try to informally deal with the apparent playbook conflict, he said.
Supple raised the issue of the potential impact of delay. Ferreting out information about a playbook conflict can be time-consuming, and the lawyers on the other side may drag it out. Then when you finally file a disqualification motion the court may say your motion has merit but it's too late, he said.
Silverman said his firm tries to reach a deal with the other side on the delay issue, such as an agreement that the next four weeks won't be used to argue that the motion is untimely.
Supple asked the panelists what they would do as general counsel for Mega in dealing with the other side's playbook conflict claim.
Silverman said he may call his peer in the other firm. He said he tries to figure out right away who he needs to have involved--and how to involve them without making the problem worse. You don't want the particular lawyers to be talking to each other because of the problem of disclosing confidential information, he said.
Silverman also said he always thinks about whether his firm should have outside counsel. Although he said he goes back and forth on the question of whether to retain outside counsel, Silverman told the audience that “I no longer think it makes us look guilty if we bring in outside counsel.” Bringing in a well-respected member of the bar who can say “I've looked at this and it's not how it appears” can be persuasive to the court, he said.
Retaining outside counsel also can help if there is a conflict with your client, and it can show your client that you are really serious about trying to solve the problem, Silverman said.
It can be hard to get the details about the prior engagement and the extent of the lawyer's knowledge, Silverman said. Beware of the former firm's billing records, which may contradict what the lateral remembers, and consider that she may have brought prior files with her even though her new firm has a policy against it, he said.
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