Opinion ID: 1353826
Heading Depth: 2
Heading Rank: 1

Heading: Count I: Conflict of Interest

Text: Count I alleges professional misconduct by violating Rule 4-1.9(a), which governs conflict of interest with former clients. Rule 4-1.9(a) states: 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 .... It is not disputed that respondents Carey and Danis formerly represented the Chrysler Corporation, nor is it disputed that respondents' representation of the plaintiffs against Chrysler in Beam was materially adverse to Chrysler. The only issue presented is whether the Beam case was substantially related to Carey's and Danis' previous defense work for Chrysler. Gallons of ink have been consumed by those trying to articulate or explain the test for deciding whether a substantial relationship exists between two representations. ABA/BNA Lawyer's Manual on Professional Conduct, 51:215. See also Chrispens v. Coastal Ref. & Mktg., Inc., 257 Kan. 745, 897 P.2d 104, 111 (1995). The substantially related test was first announced in T.C. Theatre Corp. v. Warner Brothers Pictures, Inc., 113 F.Supp. 265 (S.D.N.Y.1953). In announcing the rule, the court was primarily concerned with preserving client confidences and avoiding conflicts of interest. [14] T.C. Theatre, 113 F.Supp. at 268-69. The court said: It would defeat an important purpose of the rule of secrecyto encourage clients fully and freely to make known to their attorneys all facts pertinent to their cause. Considerations of public policy, no less than the client's private interest, require rigid enforcement of the rule against disclosure. No client should ever be concerned with the possible use against him in future litigation of what he may have revealed to his attorney. Matters disclosed by clients under the protective seal of the attorney-client relationship and intended in their defense should not be used as weapons of offense. The rule prevents a lawyer from placing himself in an anomalous position. Were he permitted to represent a client whose cause is related and adverse to that of his former client he would be called upon to decide what is confidential and what is not, and, perhaps, unintentionally to make use of confidential information received from the former client while espousing his cause. Lawyers should not put themselves in the position where, even unconsciously, they might take, in the interests of a new client, an advantage derived or traceable to, confidences reposed under the cloak of a prior, privileged relationship. 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 later representation within the prohibition.... Id. at 269 (citation omitted). Other courts have also commented on the rule's purpose: It 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. Finally, and importantly, a client has a right to expect the loyalty of his attorney in the matter for which he is retained. Kaselaan & D'Angelo Assoc., Inc. v. D'Angelo, 144 F.R.D. 235, 239 (D.N.J. 1992) (citing In re Corn Derivatives Antitrust Litig., 748 F.2d 157, 162 (3d Cir. 1984)). Important policies behind the rule include the promotion of fundamental fairness ... by prohibiting an attorney from using an informational advantage gained in the course of a former representation, the desire to promote client disclosure of all pertinent information ..., and the desire to promote confidence in the integrity of the judicial system. Columbus Credit Co. v. Evans, 82 Ohio App.3d 798, 613 N.E.2d 671, 676 (1992). There are three primary tests for substantial relationship used throughout the country. See Chrispens, 897 P.2d at 111. The first approach compares the facts of the former and current representations. Id. The second approach, which has not been widely adopted, insists that the issues involved in the two representations be identical or essentially the same. Id. The third approach, developed by the Seventh Circuit Court of Appeals, blends the fact and issue comparisons into a three-step test. Id. The Seventh Circuit test states: [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. Westinghouse Elec. Corp. v. Gulf Oil Corp., 588 F.2d 221, 225 (7th Cir.1978). The test does not require the former client to show that actual confidences were disclosed. That inquiry would be improper as requiring the very disclosure that [MRPC 1.9(a)] is intended to protect. Chrispens, 897 P.2d at 112. Missouri addressed substantial relationship in State v. Smith, 32 S.W.3d 532 (Mo. banc 2000). Our approach is consistent with that set out in Westinghouse and Chrispens , combining an analysis of both the facts and issues in determining substantial relationship. In Smith we said that the court employs a focused approach, where the court examines the relevant facts of the case in order to determine whether the various matters are substantially related. Smith, 32 S.W.3d at 543. [W]hether there is a `substantial relationship' involves a full consideration of the facts and circumstances in each case. Id. at 542 (citations omitted). 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 in the matter in question. Rule 4-1.9 cmt. The key to the analysis is whether there was a central issue common to both representations. Smith, 32 S.W.3d at 542-43. The fact that a lawyer has previously represented a client does not automatically preclude the lawyer from opposing that client in a later representation. The court must determine whether confidential information acquired in the course of representing the former client is relevant to the issues raised in the current litigation. Chrispens, 897 P.2d at 111. The `appearance' of impropriety must be more than a fanciful possibility. It must have a rational basis. McCarthy v. John T. Henderson, Inc., 246 N.J.Super. 225, 587 A.2d 280, 283 (1991). The court's conclusion must be based on a close and careful analysis of the record. Id. Without such an analysis, the test serves as a substitute for analysis rather than a guide to it. It is easier to find `doubt' than to resolve difficult questions of law and ethics. Id. (citing Realco Services, Inc. v. Holt, 479 F.Supp. 867, 872 n. 4 (E.D.Pa. 1979)). Chrispens offers a short, non-exclusive list of six factors that courts following the Seventh Circuit approach have considered in determining whether a substantial relationship exists. See Chrispens, 897 P.2d at 112. The factors include: (1) the case involved the same client and the matters or transactions in question are relatively 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. Id. (citations omitted). In some cases, one factor, if significant enough, can establish that the subsequent case is substantially related. Id. Careful review of the facts at hand in relation to these six factors provides a specific framework for resolution of this case. First, when compared to the prior representation, the ABS cases involve the same client, Chrysler. Because the cases all involve the Chrysler minivan in the same type of case, Chrysler's pattern of conduct is applicable despite the different specific component parts involved. It is undisputed that Carey and Danis defended the Chrysler Corporation on product liability class action lawsuits involving Chrysler minivan components and then later prosecuted a product liability class action lawsuit involving another minivan component against Chrysler. The subject matter of the lawsuits was components of Chrysler's minivan. Carey and Danis also knew how important the minivan was to Chrysler and had access to detailed, internal information and analysis done by the in-house legal department .... In fact, both Carey and Danis helped formulate the blueprint Chrysler used when defending a product liability class action suit involving the minivan. Second, respondents interviewed or deposed a number of expert witnesses while working for Chrysler that could have been called to testify in the Beam lawsuit. Carey and Danis were present during meetings with in-house Chrysler counsel when there was a discussion of the strengths and weaknesses of various Chrysler employees and expert witnesses. Carey and Danis had personal contact with a number of expert witnesses that could be used in both cases and had learned which experts Chrysler chose to use and not use. Specifically, Charles Newman stated that ... I contacted some of the same experts for possible use in the defense of the ABS case that we had contacted in the defense of the Osley case. Two witnesses, Mr. Pat Gross, an auto mechanic, and Dr. Mather, an economist, were mentioned by name and the general nature of their testimony common to these cases was briefly discussed. Third, Carey's and Danis' knowledge of Chrysler's negotiation strategies were particularly relevant. Respondents helped formulate the decision matrix used by Chrysler when defending suits precisely like Beam. The matrix listed criteria Chrysler deemed relevant and matched those criteria with a factual scenario. For each scenario, the team gave thoughts about the applicability of the criteria and the impact on the company. Fourth and Fifth, the commonality of witnesses, legal theories, and business practices of the client were significant, and there was a common subject matter as well as common issues and causes of action. This case involved the Chrysler minivan. Although the particular minivan parts at issue may have been different, in this case, testimony indicated that the actual components at issue in this type of product liability class action suit are almost irrelevant to how Chrysler defended the case. Lewis Goldfarb testified: Product-related class action[s], particularly those that follow on the heels of a government investigation, are virtually identical in the way the company handles them. The nature of the component involved is almost irrelevant to these cases because they never go to trial. We're always dealing with the government, that investigation relates to the ongoing class action case. And the class action strategy is almost independent in some respects of the nature of the component involved. Finally, information existed on Chrysler's possible defense and negotiation strategies. As previously discussed, Carey and Danis knew of and actually helped formulate Chrysler's defense and negotiation strategies. Respondents' justification for prosecuting a consumer class action lawsuit involving Chrysler minivans, within one year after having represented Chrysler, was that the component parts were different. Carey and Danis defended Chrysler on Chrysler minivan door latch cases while Beam involved Chrysler minivan anti-lock brake systems. Certainly, a client does not own a lawyer for all time. In appropriate circumstances our rules allow lawyers to take positions adverse to former clients and even to bring suit against them. See Rule 4-1.9. The similarity of each case and its facts and issues is the determinative factor. Rule 4-1.9, however, simply does not allow respondents to cut such a sharp corner here. This is why the rule is not limited to the same matter but also extends to a substantially related matter. Upon a close examination of the facts and issues surrounding the respondents' representation of Chrysler, the fact that Carey and Danis defended Chrysler in product liability class action claims involving Chrysler's minivan overshadows the fact that different automotive parts were at issue. Respondents' work at Thompson & Mitchell allowed them access to information and strategy considerations that could not be turned fairly against their former client after changing employment. Although these lawsuits concerned different parts, the issues in the lawsuits and Chrysler's defense strategies were shown to be unavoidably linked. The expertise that Carey and Danis developed at Chrysler's expense and the confidences shared with them by Chrysler cannot be used by respondents to harm their former client. No client should ever be concerned with the possible use against him in future litigation of what he may have revealed to his attorney. Matters disclosed by clients under the protective seal of the attorney-client relationship and intended in their defense should not be used as weapons of offense. T.C. Theatre, 113 F.Supp. at 269. The public must have confidence in the integrity of the Bar and every client has a right to expect the loyalty of his attorney in the matter for which he is retained. Kaselaan, 144 F.R.D. 235, 239 n. 5 (D.N.J.1992). Every lawyer owes a solemn duty ... to strive to avoid not only professional impropriety but also the appearance of impropriety. Doe v. Perry Cmty. School Dist., 650 N.W.2d 594, 599 (Iowa 2002). It is this Court's duty to not only dispense justice, but equally important, to maintain the integrity of the judicial system. The public's trust and confidence in the system is essential to the ability of the system to function efficiently and justly. As this Court has previously noted even an appearance of impropriety may, under the appropriate circumstances, require prompt remedial action.... Contant v. Kawasaki Motors Corp., 826 F.Supp. 427, 429 (M.D.Fla.1993) (citation omitted). By representing Dennis Beam in a products liability class action lawsuit against Chrysler, respondents Carey and Danis represented another person in a substantially related matter that was materially adverse to their former client in violation of Rule 4-1.9.