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Although the Code did not directly address the problem of successive representation, the Model Rules adopted a version of the substantial relationship test used by the courts to disqualify attorneys. Under the Model Rules, a lawyer who has previously represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter where that person's interests are materially adverse to the former client unless the client consents after consultation. M.R. 1.9. In "interpreting the Rule, the Commentary indicates that the scope of a matter depends on the facts involved, and that the "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. . . . " See also Restatement, § 213. The primary rationale behind this rule is protection of client confidences and, to a lesser extent, preservation of loyalty and avoidance of an appearance of impropriety.
Under what circumstances can an attorney be disciplined for undertaking subsequent representation adverse to a former client? Are the standards for disqualification different? Should they be? Read Model Rule 1.9, 1.10(b) and related Commentary.
Most of the law in this area has developed in the context of disqualification cases. During the time of the Code of Professional Responsibility, courts looked to Canons 4 (confidentiality), 5 (conflicts/independent judgment) and 9 (appearance of impropriety) for guidance, but no provision expressly addressed this issue. The courts developed their own approaches, culminating in the "substantial relationship" test, which was ultimately adopted by the Model Rules. The term "substantially related" appears in Rule 1.9, but is not defined. Court opinions help with that definition.
CHRISPENS v. COASTAL REFINING & MARKETING, INC.
257 Kan. 745, 897 P.2d 104 (1995)
DAVIS, Justice
This appeal involves a motion to disqualify counsel under Model Rules of Professional Conduct (MRPC) 1.9(a) (1994 Kan.Ct.R.Annot. 320) . . . .
Christopher Christian was a member of the firm of Turner and Boisseau, Chartered, from 1991 to 1993. During this time, he, along with Eldon Boisseau, represented Coastal Refining and Marketing, Inc., in several cases involving pipeline leakage or spills. In September 1993, Christian left Turner and Boisseau and began working for the firm of Michaud, Hutton, Fisher & Andersen (Michaud firm). In November 1993, the Michaud firm, with Christian signing the petition on behalf of plaintiffs Eldon Chrispens, et al, (Chrispens), filed an action against Coastal Refining and Marketing, Inc., (Coastal) alleging that its clients were injured by substances that leaked from a pipeline owned by Coastal.
Before any discovery, Coastal filed a motion to disqualify Christian pursuant to MRPC 1.9(a), and to disqualify the Michaud firm pursuant to MRPC 1.10(b). After an evidentiary hearing with testimony from Eldon Boisseau and Debra Broussard, Coastal's in-house counsel, the trial court determined that the Coastal cases upon which Christian worked when a member of the firm of Turner and Boisseau were not substantially related to the case in which Christian, as a member of the Michaud firm, now brought suit against Coastal. The court held that in the absence of a substantial relationship between the cases, MRPC 1.9(a) did not prevent Christian from suing his former client, Coastal. Based on its decision of no personal conflict, the question of imputed disqualification of the Michaud firm was resolved against Coastal. . . .
Our discussion centers upon [MRPC 1.9] . . . . The applicable provisions of MRPC 1.9(a) provide:
A lawyer who has formerly represented a client in a matter shall not thereafter: (a) 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 consents after consultation." (1994 Kan.Ct.R.Annot. 320.) (Emphasis added.)
The trial court determined that there was not a substantial relationship between the previous cases Christian worked on while at Turner and Boisseau and the new case filed by Christian against his former client while working at the Michaud firm. This conclusion resulted in the court's denial of the motion for disqualification based upon a conflict of interest. Our first inquiry, and to a large extent, the resolution of this appeal, involves a determination of what is meant by the phrase "substantially related matter" expressed in MRPC 1.9(a) . . . .
SUBSTANTIALLY RELATED MATTER
One noted authority has commented that gallons of ink have been consumed by those who have tried to determine or explain the test for deciding whether a substantial relationship exists between representations. ABA/BNA Lawyers' Manual on Professional Conduct, 51:215. There is widespread agreement that conflict questions involving former clients should be resolved through application of the substantial relationship test. However, there is no standard definition of what the test should compare in determining whether there is a close connection between the conflicting representations. ABA/BNA Lawyer's Manual on Professional Conduct, 51:225. The Model Rules do not provide a definition, nor do the comments to the rules attempt to define the phrase "substantially related." There is no Kansas case law addressing the meaning and application of the phrase "substantially related matters" as used in MRPC 1.9(a) . . . .
The ABA/BNA Lawyer's Manual on Professional Conduct, 51:225 notes:
Perhaps the most widely followed formulation of the substantial relationship test is that it compares the 'matter' or 'subject matter' of the former representation to that of the current representation. 'Matter' is the word used in Model Rule 1.9(a), and this word, or the term 'subject matter,' is a popular means of applying the substantial relationship test.
Three separate approaches regarding the substantial relationship test have been used throughout the country. The first approach indicates that the comparison of the former and current representations should center on the facts of each case. The second approach, advanced by the Second Circuit, insists that the inquiry should focus on legal issues and requires the issues involved in the former representation to be "identical" to or "essentially the same" as those presented in the current representation. The relationship under the second approach must be "patently clear." This approach has not been a view widely adopted. See Nelson, Conflicts in Representation: Subsequent Representations in a World of Mega Law Firms, 6 Geo.J. Legal Ethics 1023, 1031 (1993). The third approach is set forth in the case of Westinghouse Elec. Corp. v. Gulf Oil Corp. The Seventh Circuit blends fact and issue comparisons into a three-step substantial relationship test:
[D]isqualification questions require three levels of inquiry. Initially, the trial judge must make a factual reconstruction of the scope of the prior legal representation. Second, it must be determined whether it is reasonable to infer that the confidential information allegedly given would have been given to a lawyer representing a client in those matters. Finally, it must be determined whether that information is relevant to the issues raised in the litigation pending against the former client.
The substantial relationship test developed so that a determination of a conflict of interest could be made without requiring the former client to reveal what confidential information passed from client to lawyer. The following quote from T.C. & Theatre Corp. v. Warner Bros. Pictures, which did not invent the substantial relationship test but is perhaps the case responsible for popularizing it, highlights the objective of the test: " 'In cases of this sort the Court must ask whether it can reasonably be said that in the course of the former representation the attorney might have acquired information related to the subject of his subsequent representation. If so, then the relationship between the two matters is sufficiently close to bring the latter representation within the prohibition of Canon 6,' the former- client conflicts rule in the ABA Canons of Professional Ethics. Whether using the Model Code or the Model Rules as their guide, courts follow the same path today." ABA/BNA Lawyer's Manual on Professional Conduct, 51:226-27.
Several federal cases interpreting Kansas law have dealt with the phrase "substantially related" as used in MRPC 1.9(a). In Graham v. Wyeth Laboratories, the Tenth Circuit noted that the term "has acquired the status of a term of art in the general law of attorney conflicts of interest," and defined the term to mean that the "factual contexts of the two representations are similar or related." This same definition was employed in Geisler by Geisler v. Wyeth Laboratories.
In Graham v. Wyeth Laboratories, the Tenth Circuit found that cases were substantially related when the actual context of the two representations were similar or related. In Koch v. Koch Industries, the United States District Court defined the term "substantially related" to mean that the cases "involve the same client and the matters or transactions in question are relevantly interconnected or reveal the client's pattern of conduct." . . . In Trone, the court states: "[T]he underlying concern is the possibility, or appearance of the possibility, that the attorney may have received confidential information during the prior representation that would be relevant to the subsequent matter in which disqualification is sought. The test [under MRPC 1.9(a) ] does not require the former client to show that actual confidences were disclosed. That inquiry would be improper as requiring the very disclosure the [MRPC 1.9(a) ] is intended to protect."
Each case under both MRPC 1.9(a) . . . must be decided on its unique facts and an application of the rule to those facts. This perhaps is another way of saying that the determination of conflict under MRPC 1.9(a) . . . must be made on a case-by-case basis with the decision to be based on the unique facts and application of the rule to facts of that case. Factors which courts have considered in making a determination under MRPC 1.9(a) . . . include: (1) The case involved the same client and the matters or transactions in question are relevantly interconnected or reveal the client's pattern of conduct; (2) the lawyer had interviewed a witness who was key in both cases; (3) the lawyer's knowledge of a former client's negotiation strategies was relevant; (4) the commonality of witnesses, legal theories, business practices of the client, and location of the client were significant; (5) a common subject matter, issues and causes of action existed; and (6) information existed on the former client's ability to satisfy debts and its possible defense and negotiation strategies. This is by no means an exhaustive list but merely reflects that the determination is oftentimes an evaluative determination by the trial court based upon the unique facts of the case. In some cases, one factor, if significant enough, may establish that the subsequent case is substantially similar. For example, if the former representation involved defending the client on a criminal charge and the attorney is thereafter elected as a prosecutor and then seeks to prosecute the same client upon a charge connected with the prior defense, the former representation alone makes the disqualification an easy question.
On the other hand, in cases less clear, the trial court must balance the previous client's right of confidentiality, the right of having a reasonable choice of legal counsel, and the right of lawyers to form new associations and take on new clients when leaving a previous association. Given the mobile society we live in and the very real need to preserve professional integrity as well as the real needs of those citizens who rely upon attorneys for assistance, the balancing of the competing interests becomes very difficult at times. Both the wording of the rules involved and the somewhat elusive test of "substantially related" provide the court with an opportunity to make a circumspect decision concerning conflict of interest. We reject the narrow Second Circuit view, which requires that a substantial relationship must be patently clear and disqualification is required only when the issues involved are identical or essentially the same. We adopt a rule which requires the trial court to make a determination after considering the facts surrounding the two representations. . . .
BURDEN OF PROOF
. . . MRPC 1.9 deals with the disqualification of an individual attorney. There is no requirement under this rule as there is under MRPC 1.10(b) to establish that the attorney gained material and confidential information during the course of his or her previous employment. As stated in Koch v. Koch Industries, disqualification under MRPC 1.9(a) is dependent upon the party moving for disqualification to establish that (1) the attorney whose disqualification is sought formerly represented them in a matter, (2) the matter is substantially related to a matter in which the attorney now seeks to represent a new client, and (3) the new client's interest is substantially adverse to the interest of the party seeking disqualification. We hold that the burden of proof under MRPC 1.9(a) is upon the party alleging conflict and moving for disqualification.
PRESUMPTIONS
The question under MRPC 1.9(a) regarding presumptions is: Once a matter has been found to be substantially related under MRPC 1.9(a) and all other requirements of the rule have been satisfied, does this result in automatic disqualification of the subject attorney? . . .
The answer to the question posed in the last paragraph is twofold. First, if the disqualification motion is advanced solely under MRPC 1.9(a), an irrebuttable presumption arises that in cases "substantially related," the former client revealed confidential information requiring the attorney's disqualification. . . .
A. Proceeding Under MRPC 1.9(a)
Once it has been established that an attorney has formerly represented a client in a matter and seeks to represent another client in the same or a substantially related matter in which that client's interests are materially adverse to the interests of the former client, an irrebuttable presumption arises that the attorney acquired confidential information in the former representation and is disqualified from representing the latter client. MRPC 1.9(a), by its express terms, provides that an attorney who has represented a client in a matter "shall not" represent an adverse party in the same or a substantially related matter. This is consistent with the substantial relationship test as used in the majority of jurisdictions. In Koch, the federal district court stated:
If a substantial relationship is found, an irrebuttable presumption arises that the former client revealed facts requiring the attorney's disqualification. The court need not inquire into whether the confidential information was actually revealed or whether the attorney would be likely to use the information to the disadvantage of the former client. . . . To conduct such an inquiry would frustrate the former client's interest in the confidential information.
We believe the reasoning of Koch is sound. The reason for this irrebuttable presumption, as noted in Koch, is rooted in the idea of attorney loyalty:
[MRPC 1.9(a) ] is a prophylactic rule to prevent even the potential that a former client's confidences and secrets may be used against him. Without such a rule, clients may be reluctant to confide completely in their attorneys. Second, the rule is important for the maintenance of public confidence in the integrity of the bar. [Citation omitted.] Finally, and importantly, a client has a right to expect the loyalty of his attorney in the matter for which he is retained.
Where a lawyer has been directly involved in a specific transaction, subsequent representation of clients with materially adverse interests in a matter substantially related to the specific transaction is prohibited. The burden upon a motion for disqualification under this rule is upon the moving party asserting the conflict. See MRPC 1.9, Comment (1994 Kan.Ct.R.Annot. 320- 21). . . .
[The court engaged in a lengthy analysis of the facts involving Christian’s prior representation of Chrispens and the current case].
CONCLUSION
Coastal's burden under MRPC 1.9(a) was to show that (1) Christian formerly represented it in a matter, (2) that the matter is substantially related to the matter in which Christian now seeks to represent a new client, and (3) that the new client's interests are substantially adverse to the interests of Coastal.
The essential facts are not in dispute. As we have stated above, the trial court's conclusion that the matters were not substantially related is a question of law subject to de novo review. Contrary to the trial court's conclusion, we conclude as a matter of law that the matter between the two representations were substantially related. We base this conclusion on the facts that all cases involved the same client; that the matters or transactions in question are relevantly interconnected and reveal Coastal's pattern of conduct; that Christian had interviewed and acquired valuable knowledge of the weaknesses and strengths of key witnesses who will be key witnesses in the Chrispens case; that Christian obtained confidential financial information in representing Coastal concerning the settlement of a punitive damage claim in the Jerke/Ebenkamp cases, which information is material and relevant in the Chrispens case; that Christian gained material, confidential information of Coastal's negotiations strategies which may become valuable in the Chrispens case; that all cases involve the common subject of pipeline leaks or spills from Coastal's Wichita refinery; and that the previous representation by Christian of Coastal terminated less than three months from the time Christian initiated the Chrispens action against Coastal.
Reversed and remanded with directions to grant the motion for disqualification.
Chrispens identifies various approaches to determining whether a substantial relationship exists. Which approach (issue or fact-based) seems more appropriate? It appears that the majority is leaning toward a fact-based approach, which may be more sound since, as the court noted in Carlson v. Langdon, 751 P.2d 344, 349 (Wyo. 1988), issues frequently do not develop until long after litigation has been instituted. An approach that considers the factual context of the matters to determine if they have common facts is more consistent with the underlying concern that the attorney may have been in a position to receive confidential information which could possibly be used to the detriment of the former client in the later proceeding. Id. Some courts look to both a comparison of the issues and a review of the facts in order to determine whether a substantial relationship exists. See, e.g., Home Ins. Co. v. Marsh, 790 S.W.2d 749, 754 (Tex. Ct. App. 1990). As the authors of the ABA/BNA Manual have noted, "[i]n practice, the distinctions between formulations of the substantial relationship test become blurred." 51:226.
Should the test for "substantial relationship" be a strict one, or should it be fairly liberal? Which approach does the Chrispens court take? As noted, some courts require that the relationship be "patently clear,’ while other courts appear to require merely that there be an opportunity for "greater insight" into the affairs of the client. The courts using a strict approach are usually concerned primarily, if not exclusively, with protecting confidential information. Those courts using broader tests are frequently also concerned about appearance of impropriety. How would it look to the public to allow the attorney to sue his or her former client in this situation? Is this an appropriate consideration? Canon 9 of the Code of Professional Responsibility provided that a lawyer should avoid the appearance of impropriety. The Model Rules contain no such provision. Is appearance of impropriety an appropriate basis for disqualification where there is little or no real risk to confidential information? Courts today are split on this issue. Compare Harker v. Commissioner of Internal Revenue, 82 F.3d 806. 808-809 (8th Cir. 1996)(not appropriate); President Lincoln Hotel Venture v. Bank One, 271 Ill. App. 3d 1048, 649 N.E.2d 432, 441 (1994)(appearance of impropriety "too slender a reed" on which to base disqualification even under the Code) with First American Carriers, Inc. V. Kroger, 302 Ark. 86, 787 S.W.2d 696 (1990) (test still appropriate); Heringer v. Haskell, 536 N.W.2d 362, 366-67 (N.D. 1995)(appearance of impropriety standard "has not been wholly abandoned in spirit."). At least one court has equated the appearance of impropriety considerations that appeared in the old Code with loyalty considerations recognized by the Commentary to the Model Rules. See In re American Airlines, Inc. AMR, 972 F.2d 605, 607-20 (5th Cir. 1992).
As noted, where a court finds a substantial relationship, it will presume that the attorney has access to confidential information that would be helpful in the current litigation. Most courts hold this presumption to be irrebuttable and require disqualification. See. e.q. Herbes v. Graham, 180 Ill. App. 3d 692, 536 N.E.2d 164, 168 (1989); Home Insurance, 790 S.W.2d at 754. If no substantial relationship is found, the party seeking disqualification may still be permitted to demonstrate that there is a substantial risk that confidential information may be used improperly. See Restatement, § 213. If such a risk exists, disqualification is appropriate. Does the availability of disqualification even in the absence of a finding of substantial relationship indicate that the test ought to be a narrow one? After all, the test only addresses when automatic disqualification is required. If no such relationship exists, the party seeking disqualification still can prove that specific information is at risk. But doesn’t the need to do so put the information even more at risk?
Where an attorney has been disqualified, most courts will permit that attorney to turn over work product to new counsel unless actual confidential information is included or other improper advantage is likely. See, e.g., First Wisconsin Mortgage Trust v. First Wisconsin Corp., 584 F.2d 201 (7th Cir. 1978) and Canadian Gulf Lines, Inc. v. Triton International Carriers, Ltd., 434 F. Supp. 691 (D. Conn. 1976); see also EZ Painter Corp. v. Padco, Inc., 746 F.2d 1459, 1463 (Fed. Cir. 1984) (work product created after new lawyers who possessed information came to firm not turned over; previous work product could be given to new counsel.)
What about consultations with prospective clients? If a lawyer declines representation and is thereafter consulted by a person with interests materially adverse to the prospective client in a substantially related matter, should the lawyer be disqualified? Not necessarily, according to the Restatement. While recognizing that the Model Rules do not really address the issue, the Restatement would require disqualification only if the lawyer "has received from the prospective client confidential information that could be significantly harmful to the prospective client." Restatement § 27 (P.F.D. #1 1997). The Restatement recognizes that the policy considerations are different with prospective and actual clients. What are these differences? Do you agree that prospective clients should be treated differently?
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