Tuesday, November 23, 2010

Law Firm Ethical Wall -- Proper Screening Prevents Imputation / Disqualification

[h/t to Bill Freivogel]. An interesting decision from the US District Court of Utah, Central Division, regarding a disqualification motion. In this case, lawyers representing the plaintiff in a patent suit discovered that a former associate, who had spent 500 hours reviewing documents in support of the original patent application, was now in the employ of the law firm representing the current defendant (Quinn Emanuel).

The complete decision is detailed in: Lutron Electronics Co., Inc. v. Crestron Electronics, Inc., 2010 U.S. Dist. LEXIS 120864 (D. Utah Nov. 12, 2010). Here, the plaintiff's firm notified Quinn Emanuel about the conflict and demanded the firm withdraw from the matter. The firm, protested, arguing that it erected an ethical wall as soon as it became aware of the conflict and provided proper notification regarding its screening measures. Unsatisfied, the plaintiff moved for disqualification.

In this case, the court denied the motion, noting that Utah Rules of Professional Conduct and relevant case law did not mandate disqualification. In this instance, they explicitly supported the sufficiency of an ethical wall, even when a lawyer previously represented an adverse party and did not obtain client consent:
  • Local rules supports unilateral screening -- "The Utah rule differs from the ABA Model Rule by explicitly permitting the use of ethical screens for lawyers moving between private firms who would otherwise be disqualified under Rule 1.9...so long as the conditions of paragraph (c) are met, the imputed disqualification is removed, and consent to the new representation is not required."
  • Imputation should be applied cautiously -- "If the concept of imputation were applied with unqualified rigor, the result would be radical curtailment of the opportunity of lawyers to move from one practice setting to another and of the opportunity of clients to change counsel." [Comment to Rule 1.9 of Utah RPC]
  • Rules and case law call for a "functional analysis" of specific situational details, rather than automatically granting blanket imputation -- Both the Utah Rules of Professional Conduct and this court's precedent reflect the trend among numerous jurisdictions that have adopted a "functional analysis" to decide issues of imputed conflicts....In adopting this approach, the court has expressly stated that 'the fact that the conduct in question has been found to constitute a violation of the Code of Professional Responsibility  [*15] does not require disqualification of counsel as a matter of course.'"
  • Screening and notification measures were sufficient -- "...they immediately established an effective ethical screen in full compliance with the rules... it did thereafter notify Lutron of the measures it had taken to screen Mr. Reisberg and to ensure that Lutron's confidential information would be protected."

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