Tuesday, June 2, 2015

Risk News: Conflicts, Disqualifications, Screens and Bright Lines in Canada


Interesting update from Thomson Hine: "'Comprehensive' ethical screen fails to avoid disqualification from side-switching paralegal" --
  • "Small may be beautiful, but when it comes to law firms, small can signal disqualification troubles that a bigger firm might sometimes be able to avoid, according to the reasoning of a recent opinion."
  • "In the recent case, Ullman v. Denco, a  New Mexico federal court magistrate judge granted disqualification, booting defendants’ counsel from eleven consolidated employment cases after the firm hired a paralegal from the firm representing the plaintiffs."
  • "The paralegal had worked extensively on the cases; she had interviewed most of the clients, and had  detailed information about plaintiffs’ legal strategies and bottom line settlement numbers."
  • "Under those circumstances, the side-switching paralegal clearly could not herself participate in the consolidated case.  The question was whether her personal disqualification would be imputed to the entire six-lawyer defense firm — especially considering the fact that the defense firm had quickly put up an elaborate ethical screen."
  • "The magistrate judge held that the paralegal’s disqualifying conflict would not be imputed to the rest of the firm. Comment [4] to New Mexico’s version of the conflict imputation rule, Model Rule 1.10, says that the disqualification rules do not 'prohibit representation by others in the law firm where the person prohibited from involvement in a matter is a non-lawyer, such as a paralegal or legal secretary. However, the defense firm’s continued representation of its employer clients was doomed anyway, because the magistrate judge held that even the comprehensive screen the firm proposed 'would not be effective'  — in part because the firm was just too small."
We've seen several stories about IP-related matters. Here's another: "Motion To Disqualify Law Firm Is Granted" --
  • "Plaintiff accuses defendant’s NAND flash products of infringing eight patents. Two of the attorneys in that firm were previously employed by Weil Gotshal & Manges where the represented defendant in seven patent cases and a trade secret case focused on NAND flash technology.  The court finds that the current representation is substantially related to the prior NAND flash and trade secret cases. The law firm is disqualified."
Finally, from Canada comes an interesting conflicts update and extensive analysis: "The “bright line” rule is dimmed by the Alberta Court of Appeal in Statesman" --
  • "Joint retainers are common in modern legal practice. But what happens when a dispute is brewing between two parties represented by the same law firm? How is a lawyer to know when the “bright line” of conflict of interest has been crossed? And when the duty of loyalty to a client is breached, when is disqualification of the law firm an appropriate remedy? The Alberta Court of Appeal addressed these issues in Statesman Master Builders Inc v Bennett Jones LLP, 2015 ABCA 142 (“Statesman”)."
  • "The Court of Appeal discussed the duty to avoid conflicts of interest in the context of the “bright line” rule set out by the Supreme Court of Canada in R v Neil, 2002 SCC 70 (“Neil”). The bright line rule prohibits a law firm from representing one client whose interests are directly adverse to the immediate interests of another current client, even if the two mandates are unrelated, unless both clients consent after receiving full disclosure."
  • "The Court of Appeal said that the bright line rule appeared “at first glance” to apply because Statesman was still a client of the Law Firm when Matco commenced planning its legal strategy in the oppression action. The Court of Appeal, however, emphasized the limitations of the bright line rule..."
  • "In the absence of the bright line rule, there was no evidence that the Law Firm’s representation of Statesman on the builders’ lien matter was materially and adversely affected during the “short overlap” between Matco first discussing the oppression action with the Law Firm, and the termination of Statesman’s limited retainer."

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