Law Firm Conflicts and Lateral Hires
AMY DEVAN, J.
Law firms and lawyers must recognize the importance of performing conflict checks any time an attorney makes a lateral move. This article discusses how to handle conflicts when lawyers move between firms.
The days of young associates working their entire careers for the same firm are long behind us. According to a 2016 Bureau of Labor Statistics news release, the average tenure for legal professionals is five-and-a-half-years per job. This means that in the course of a 25- or 30-year career, the typical lawyer will work in at least five different jobs with five different firms. In addition, through mergers or other growth, law firms are getting larger and lawyers are combining in new ways. Through creative combinations, including collaborative work arrangements or office sharing, solo and small firms are also finding themselves in a new world of cooperation. This combination of larger firms with greater lawyer mobility, coupled with innovative solutions to lawyering in general, brings a level of dynamism to the market, but it also brings an increased risk of conflicts created by lateral moves, which can subject lawyers to sanctions or disqualification if they are not careful.2
Lawyers and law firms are well aware of the need to avoid conflicts of interest and are familiar with the concept of checking potential clients and adverse parties for conflicts before taking on new cases. But it is equally important to identify lateral-hire conflicts—those created by lawyers moving between firms—before new hires join the firm, both with regard to existing firm clients, as well as clients who will follow the lawyer when he moves. Firms must conflict-check every new hire, carefully analyze the information received, and make thoughtful and appropriate decisions about what to do with it.
This article addresses some of the issues related to lateral-hire conflicts and provides practical advice for lawyers and law firms about how to prepare for and deal with conflicts created by lawyers moving between firms.
Rules of Professional Conduct
Several Colorado Rules of Professional Conduct (Colo. RPC or Rules) may be implicated when firms hire lawyers who potentially bring with them a conflict-of-interest issue:
Under Rule 1.6(a), a lawyer "shall not reveal information relating to the representation of a client" absent client consent or an exception. This Rule often gave lawyers pause when deciding whether to provide client information to a new FEATURE PROFESSIONAL CONDUCT AND LEGAL ETHICS firm for purposes of conflict checks before joining the firm. In response, the American Bar Association (ABA) amended the Model Rules of Professional Conduct, and many states, including Colorado, followed suit. Colo. RPC 1.6(b)(7) now states that a lawyer may provide limited information to a new firm "to detect and resolve conflicts of interest arising from the lawyer's change of employment or from changes in the composition or ownership of a firm, but only if the revealed information is not protected by the attorney-client privilege and its revelation is not reasonably likely to materially prejudice the client[.]"
This exception to the Rule is not intended to give lawyers freedom to reveal all client confidences. Comment  makes clear that this is a limited exception and lawyers should reveal information only "to the extent reasonably necessary" for clearing conflicts. This is discussed in more detail below.
Rule 1.7—Conflict of Interest: Current Clients
Under Colo. RPC 1.7, a lawyer must avoid concurrent conflicts of interest. This means that the lawyer cannot represent one client where the representation will be "directly adverse" to another client, or where there is a "significant risk" that the representation will be "materially limited" by some other factor.3 Clients can waive conflicts by providing "informed consent," but not all conflicts are waivable.4 For example, a lawyer cannot represent opposing parties in the same litigation matter under Rule 1.7(b)(3), even if the clients would be willing to consent (which seems unlikely).
Rule 1.9—Duties to Former Clients
This Rule prohibits a representation adverse to a former client in the "same or a substantially related" matter. Comment  to the Rule explains: "Matters are 'substantially related' for purposes of this Rule if they involved the same transaction or legal dispute or if there otherwise is a substantial risk that confidential information as would normally have been obtained in the prior representation would materially advance the client's position in the subsequent matter."
Of importance is Rule 1.9, comment , which addresses lawyers moving between firms. It states in part,
it should be recognized that today many lawyers practice in firms, that many lawyers to some degree limit their practice to one field or another, and that many move from one association to another several times in their careers. If the concept of imputation were applied with unqualified rigor, the result would be a radical curtailment of the opportunity of lawyers to move from one practice setting to another and of the opportunity of clients to change counsel.
Rule 1.10—Imputation of Conflicts of Interest: General Rule
Colo. RPC 1.10 addresses the difficulty posed when one lawyer in a firm, including a newly hired lateral, has a conflict that prohibits the entire firm from representing a client, unless the personally disqualified lawyer did not substantially participate in the matter at the old firm and is timely screened from involvement with the matter at the new firm. Screening thus can cure some but not all imputed conflicts. Under Rule 1.10(e), despite the personal disqualification of a lawyer, the firm may avoid imputation if:
(1) the matter is not one in which the personally disqualified lawyer substantially participated;
(2) the personally disqualified lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom;
(3) the personally disqualified lawyer gives prompt written notice ... to the affected former clients and the former client's current lawyers...; and
(4) the personally disqualified lawyer and the partners of the firm... reasonably believe that the steps taken to accomplish the screening of material information are likely to be effective in preventing material information from being disclosed to the firm and its client. Notably, Colo. RPC 1.10(e) differs from ABA
Model Rule 1.10 in that the Model Rule permits screening regardless of the lateral hire's level of participation in the matter at the prior firm.5