PROFESSIONAL CONDUCT AND LEGAL ETHICS
By Evan Stephenson and Kristen Ferries
This article addresses lawyer disqualification due to a former client conflict under Colorado Rule of Professional Conduct 1.9(a). It focuses on the recent Colorado Supreme Court opinion in Persichette v. Owners Insurance Co.
The Colorado Rules of Professional Conduct (Colo. RPC or Rules) explicitly provide that" [l]awyers play a vital role in the preservation of society."1 "As a member of the legal profession, a lawyer is more than an advocate for his or her clients; she is also 'an officer of the legal system,' having special responsibility for the quality of justice." Accordingly, lawyers have a fundamental responsibility to preserve the confidentiality of their clients' information.3 Moreover, the sanctity of the attorney-client relationship depends on lawyers keeping their clients' confidences. The inviolability of the relationship permits clients to make themselves vulnerable to their trusted lawyers, which in turn enables lawyers to counsel their clients effectively. But to feel comfortable sharing private information with a lawyer, clients must be assured that their private information will remain confidential, even after die attorney-client relationship ends. This means the legal profession must not allow lawyers to we a ponize client confidences against a client at a later time. Thus, "an attorney has certain ethical duties to former clients that persist even after the attorney-client relationship has concluded."4
This article discusses lawyer disqualification under Colo. RPC 1.9(a), with a focus on the recent opinion in Persichette v. Owners Insurance Co.5
The Rules' Framework for Confidentiality
To protect the confidential nature of the attorney-client relationship, Colo. RPC 1.6 and 1.9, respectively, prohibit a lawyer from revealing a client's or former client's confidential information.6 Rule 1.9(a) goes further, providing that a "lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing." When a lawyer accepts a representation adverse to a former client, the lawyer must navigate the competing ethical duties owed to the current client8 and the former client, especially with respect to safeguarding the confidentiality of the former client's information.9 Naturally, this ethical dilemma only arises when the representations of the former and current client are related. For that reason, Rule 1.9 permits disqualification only in the limited situation where the former and current representations are "substantially related."10
To disqualify a lawyer under Rule 1.9, the moving party must show: "(1) an attorney-client relationship existed in the past; (2) the present litigation involves a matter that is 'substantially related' to the prior litigation; (3) the present client's interests are materially adverse to the former client's interests; and (4) the former client has not consented to the representation after consultation."11 The movant has the burden to establish these elements.12
Matters are "substantially related" for purposes of this Rule if they involve the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client's position in the subsequent matter.13
This definition left trial courts wondering: When is there a "substantial risk" that "confidential factual information" would "materially advance" the client's position in the subsequent matter? In 2017, the Colorado Supreme Court provided some guidance on this question in Villas at Highland Park Homeowners Association, Inc. v. Villas at Highland Park, a case primarily concerning issue preclusion.
The Villas Case
In Villas, a homeowner's association brought a construction defect case against a developer.
The developer moved to disqualify die association's lawyer because she had previously represented the developer in construction defect cases.15 The developer argued that the representations were substantially related because both involved construction defect allegations. The district court, however, invoked die doctrine of issue preclusion and denied die motion without substantively analyzing Rule 1.9.16 The court concluded that because other courts had previously denied the developer's motion to disqualify his former lawyer, the doctrine precluded die developer, as a threshold matter, from moving to disqualify in Villas.
The Supreme Court reversed, holding that die dispositive legal issue in die developer's motion to disqualify—whether the case was "substantially related" to die lawyer's prior representation of die developer—was not identical to die dispositive legal issue in his other motions to disqualify. This was because die question of whether one case is substantially related to a lawyer's prior representation could not be identical to die question of whether a different case is substantially related to that same prior representation.19
In analyzing die district court's application of issue preclusion, the Court also addressed die requirements for disqualification under Rule 1.9. First, the court explained that Rule 1.9 "is concerned with die type of confidential factual information that normally would have been revealed in a typical representation, rather than die confidential factual information that was actually revealed."20 Thus, the moving party need not reveal the confidential information it seeks to protect in moving to disqualify (which would defeat die purpose of die Rule). The Court added that because Rule 1.9 is "concerned with die risk of disclosure" of former client information, "die crucial question is whether die confidential factual information in the attorney's probable possession is relevant to subsequent claims in a manner that would materially advance those claims—which, in turn, depends on die precise legal theories and allegations in those claims."21
The Court remanded die case to die district court to resolve the developer's motion to disqualify with die hint that" [w]here a lawyer handles recurrent yet factually distinct problems, each individual matter is likely to involve a distinct set of dispositive facts."22 "In such a situation," die court continued, "die information that an attorney obtains in a prior representation is not necessarily relevant in later matters and consequently, there is no substantial risk that die attorney could use die information to gain an unfair advantage."
On remand, die district court denied die developer's motion to disqualify, this time after substantively applying Rule l.9.24 The court found that die evidence required to succeed on a construction defect claim "is unique to the facts of die case which are probative of whether the builder used reasonable care and skill in constructing the particular homes at issue."25 The court explained that, to die extent die lawyer learned any confidential factual information about the developer's general litigation strategy in construction defect cases, such information was "playbook information" (knowledge about a company's general operations) that did not justify disqualification. The court further explained that under Rule 1.9 comment , playbook information is only disqualifying when the lawyer has knowledge of "specific facts gained in a prior representation that are relevant to the matter in question."
The developer did not show what confidential facts his lawyer would have learned in the prior construction defect cases that would be relevant to the subsequent case. Thus, the district court concluded that "die vast majority of the information she would have acquired would be die 'nuts and bolts' of die particular case—the innumerable details regarding site, design, materials, workmanship, etc.—which would have little, if any, relevance even to the very next case she worked on, let alone one arising a decade or more in the future."26
Beyond Villas, which did not squarely address the substantial relationship test under Rule 1.9—indeed, die Court left that analysis to the district court—legal authority in Colorado has scarcely examined die term "substantially related." Trial courts thus received little guidance on the level of similarity among representations necessary to require die lawyer to be disqualified for an ethical conflict of interest.
In May 2020, that changed when die Colorado Supreme Court applied die substantial relationship test in the context of an insurance bad faith case.27 The Court held that a law firm, which had a decade-long attorney-client relationship with an insurance company in which the firm "helped put in place" the insurance company's claims-handling practices, could not subsequently represent the plaintiff in a bad faith case against the same insurance company.28 In so ruling, the Court both protected the insurance company from disclosure of its confidential information and bolstered Rule 1.9's purpose of protecting the sanctity of the attorney-client relationship and promoting trust between client and lawyer.
Persichette in the District Court
In Persichette, the plaintiff sued Owners Insurance Co. (Owners), alleging bad faith breach of an automobile insurance policy's under insured motorist (UIM) coverage and seeking statutorily...