MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2008-11
Conflict of Interest with Former Client
Your firm represents a client that is in the insurance brokerage business (“Client A”). As counsel to Client A, … [you] received a copy of a letter from a lawyer for a company in competition with Client A (“Company X”), claiming that Client A was aiding another company (“Company Y”) in efforts by Company Y to solicit clients of … [Company X], all in violation of a non-solicitation covenant in a sales and marketing agreement between Company X and Company Y… (the “Agreement”). Client A was not a party to the … [A]greement that Company X claims was violated.
After your firm asked Company X to state the theory and law supporting its claim against Client A, Client B, who is now an officer of Company X, called and alleged that your firm had a conflict of interest in representing Client A in the current matter.
You next indicate that your firm’s former “representation of Client B was brief”; that “Client B, while working for a company that later became an affiliate of Company Y [emphasis added],”1 had come “to [y]our firm for advice on how to protect his clients2 in what was then a likely forthcoming transaction involving … [Client B’s] company [emphasis added]”; and that your “advice consisted mainly of a discussion of Client B’s duties of loyalty … to a current employer while preparing for employment elsewhere.” You indicate that “Client B’s future goals were unclear” and that “after the initial discussion of” Client B’s fiduciary duties to his employer, Client B indicated that you should do nothing further “until he figured out his next move.” Finally, you also indicate that “during the course of” your firm’s brief representation of Client B, Client B provided you with several documents relating to “his anticipated new business relationships” and that they consist of “partnership agreements Client B had with others, including a list of clients and commissions for the year 2005.” You next note that while “the list provided by Client B is in such small print as to be difficult to read,” “such client list appears not to match the client list that Company X said was the subject of the Agreement.”
As you acknowledge in your inquiry, your circumstances are addressed by the Maryland Lawyers’ Rules of Professional Conduct, Rule 1.9 inasmuch as the ostensible conflict of interest at issue is one between a present client (Client A) and a former client (Client B). Rule 1.9 provides in pertinent part as follows:
(a) 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 … [emphasis added].
* * *
(c) A lawyer who has formerly represented a client in a matter … shall not thereafter:
(1) use information relating to that representation to the disadvantage of the former client …
(2) reveal information relating to the representation except as these Rules would permit or require with respect to a client.
Finally, the comments to Rule 1.9 indicate that the meaning of “[t]he scope of a ‘matter’ … depends on the facts of a particular situation or transaction”; that “[t]he underlying question is whether the lawyer was so involved in the matter that the subsequent representation can be justly regarded as a changing of sides in the matter in question’; that “[m]atters are ‘substantially related’ … 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.”
Based upon the foregoing, the Committee believes that your analysis of whether there is a conflict of interest should begin with a confirmation that you dealt with Client B solely in an individual capacity and not in any capacity as an officer of his employer or of Company Y. Assuming that at the time of your representation of Client B, his interests were adverse to his employer’s or Company Y’s, your evaluation of the alleged conflict should then entail a determination whether “the scope of your [current] representation of” Client A (now allied with Company Y) when you had once represented Client B could be “justly regarded as a changing of sides in the matter in question.” As the comments to Rule 1.9 indicate, appropriate considerations are whether the matters “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.” While it is not dispositive, the Committee considers the derivative or attenuated basis for the claimed conflict to be a relevant factor in your evaluation of the existence and extent of any genuine conflict of interests.3
Finally, the Committee notes that you have stated that “[i]n [y]our view, the information provided by Client B is irrelevant to [y]our representation of Client A” and that “[a]ny knowledge … [you] may have of the clients Client B wanted to protect does not put Client B at any disadvantage in [y]our representation of Client A as to the question of whether Client A is bound by any covenant to cease and desist from relations with any clients of Company X” (emphasis added). It appears therefore that after reviewing your prior representation of Client B you have, in effect, concluded that your former representation of Client B is not “the same or substantially related to” your present representation of Client A and that no harm could occur to Client B in your current representation of Client A as a result of your former representation of Client B. Based solely upon your conclusion that any information imparted by Client B is irrelevant to your representation of Client A, the Committee has discerned no facts in your inquiry which would cause the Committee to contradict your conclusion. To the extent you may have overlooked any material facts, the Committee encourages you to reevaluate the potential for a conflict of interest in light of the principles set forth above.
The Committee hopes that this opinion has been helpful.
Opinions of the Committee may be obtained from the MSBA’s website: www.msba.org.
1 You have not indicated in your inquiry whether the company Client B was originally working for became affiliated with Company Y during the course of your representation of Client B or after your representation had concluded.
2 Given the numerous entities involved, your use of “his” in this context is potentially confusing. To the extent “his clients [emphasis added]” might mean “customer accounts for which he was responsible,” you appear to have been counseling Client B about how he could retain a “book of business” if either he left or his employer changed hands. If such is the case, you counseled Client B about retaining accounts of Company Y (or its predecessor), not about how to keep or obtain the accounts of Company X, by which Client B was not then employed
3 I.e., you now represent Client A, not Company Y, and Client B is primarily concerned with conflict of the interests of Company X and Company Y, not with a direct conflict between himself and Client A.
REFERENCES:
Maryland Lawyers’ Rules of Professional Conduct, Rule 1.9
ASSIGNED TO: Hon. Mark D. Thomas
DATE ASSIGNED: May 8, 2008
DATE DISTRIBUTED: June 9, 2008