April 22, 2019

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The Colorado Lawyer: Four Things to Know About Motions to Disqualify

Editor’s Note: This article originally appeared in the April 2015 issue of The Colorado Lawyer. Reprinted with permission.

By J. Randolph Evans, Shari L. Klevens, and Lino S. LipinskyEvans-Klevens-Lipinsky


Authors’ Note
Readers’ comments and feedback on this series of “Whoops—Legal Practice Malpractice Prevention” articles are welcomed and appreciated. References in the articles to “safest courses to proceed,” “safest course,” or “best practices” are not intended to suggest that the Colorado Rules require such actions. Often, best practices and safest courses involve more than just complying with the Rules. In practice, compliance with the Rules can and should avoid a finding of discipline in response to a grievance or a finding of liability in response to a malpractice claim. However, because most claims and grievances are meritless, effective risk management in the modern law practice involves much more. Hence, best practices and safer courses of action do more; they help prevent and more quickly defeat meritless claims and grievances.


Few things are worse for an attorney than getting a new big matter, starting work on it, and then facing a motion to disqualify. At that point, the attorney is put in the awkward position of either explaining to the client why he or she should pay more money to keep the attorney, or absorbing the fees associated with defending the motion to disqualify.

Motions to disqualify are far from rare occurrences. In recent months, a number of high-profile disqualification motions have been reported.[1] Many disqualification motions are well-founded. Others are nothing more than a litigation tactic, forcing attorneys to scramble to protect valued client relationships. Significantly, the increasing mobility of lateral attorneys (with attorneys rarely spending their entire legal careers at a single law practice or firm) has raised issues that can serve as the basis of a motion to disqualify.

Disqualification motions implicate the most important duties that an attorney owes a client: the duties of confidentiality and loyalty. Under the Colorado Rules of Professional Conduct (Colorado Rules or Colo. RCP), an attorney must safeguard client confidences and secrets, subject to a few exceptions.[2] The attorney is also obligated to elevate the client’s interests above the interests of the attorney and the law firm. Disqualification motions put these obligations directly at issue.

Courts differ on how they address motions to disqualify, especially because such motions are at times simply a litigation tactic by an opposing party in search of a strategic advantage.[3] Additionally, courts are usually reluctant to interfere with a client’s choice of counsel unless the conflict is real and there are few options other than to grant disqualification.[4]

Courts also appear to distinguish between conflicts based on multiple representations and those based on successive representations.[5] After all, parties filing disqualification motions based on multiple representation conflicts are typically strangers to the attorney-client relationship.

The far more common motion to disqualify involves a former client, either of the law firm or of an individual attorney (who may have recently joined the firm). In those circumstances, courts are generally protective of confidences or secrets that the law firm or attorney may possess or to which the firm or attorney has access as a consequence of either the prior or the existing representation. According to the Colorado Supreme Court, however, a court “may not disqualify counsel on the basis of speculation or conjecture.”[6] The moving party’s burden for a motion to disqualify is satisfied only when “the motion to disqualify sets forth specific facts that ‘point to a clear danger that either prejudices counsel’s client or his adversary.’”[7]

Conflict violations are not always the focal point for resolution of a motion to disqualify. As the Colorado Supreme Court has noted, “[v]iolation of an ethical rule, in itself, is neither a necessary nor a sufficient condition for disqualification,” although there typically must be evidence of a violation or potential violation of “attorney ethical proscriptions,” such as those centered on the duties of loyalty and fairness or those intended to protect the integrity of the process.[8] Often, motions to disqualify turn on the risk that a client’s former attorney or law firm might be able to use against the client the confidences or secrets gained during the prior representation. This is because it “must be presumed” that a client shared confidences with its attorney pursuant to the attorney-client relationship.[9] Appreciating this distinction is important to successfully making or defeating a motion to disqualify.

In assessing motions to disqualify based on conflicts, Colorado courts also consider (1) a client’s preference for a particular counsel, (2) the client’s right to confidentiality in communications with his or her attorney, (3) the integrity of the judicial process, and (4) the nature of the particular conflict of interest involved.[10] Below are some important concepts that have emerged in the context of motions to disqualify.[11]

“Substantially Related” Matters

The Colorado Rules do not bar attorneys from representing current clients against former clients. Instead, Colo. RPC 1.9(a) provides 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.

Colo. RPC 1.9 does not define a “substantially related matter,” although Comment 3 to that Rule provides some context:

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.

More Than “Playbook Knowledge”

Frequently, a former client accuses the attorney of having “insider information” regarding the client that does not rise to the level of a client confidence. Indeed, even if the attorney does not possess any direct information regarding the present lawsuit or transaction, the client may say that the attorney understands how the client thinks and acts. The attorney may know the client’s bottom line for settlement or how the client prefers to approach litigation. This is often referred to as “playbook knowledge”—the attorney knows the client’s paths and approaches.

As with the “substantial relationship” test, whether an attorney’s playbook knowledge is sufficient for disqualification is heavily dependent on the facts. Thus, there is no bright-line rule or test to determine whether an attorney should be disqualified because of her or his playbook knowledge. However, Comment 3 to Colo. RPC 1.9 sets a minimum baseline: “In the case of an organizational client, general knowledge of the client’s policies and practices ordinarily will not preclude a subsequent representation.”

This comment makes clear that attorneys are permitted, under some circumstances, to engage in representations that are adverse to a former client. Possessing “general knowledge” about a client may not, by itself, be enough for disqualification. Typically, a former client seeking to disqualify a former attorney from representing an opposing party must identify specific, cogent information that the attorney possesses and show that the information is confidential and implicates the duty of loyalty.

Attorneys should not assume that possession of mere playbook knowledge precludes disqualification. Attorneys should be aware, however, that clients can make a successful case for disqualifying attorneys who had a greatly invested role with the organizational client or where the playbook knowledge is uniquely and particularly relevant to the new representation.

Avoiding the Motion to Disqualify

The best way to deal with motions to disqualify is to prevent them. Two important pre-motion strategies are effective. First, identify and resolve potential conflicts, including both multiple and successive representations, before undertaking a representation or hiring a lateral. Where a conflict exists, an effective written consent is the best defense to a motion to disqualify.

Second, take effective steps to mitigate, if not eliminate, risks that a former client’s confidences and secrets might be accessible to attorneys working on a matter involving the former client. Increasingly, courts nationwide have recognized and accepted timely, effective ethics screens as a positive factor for permitting an attorney to continue the representation, although sometimes a screen is not enough to avoid the ramifications of an imputed conflict.[12] Nonetheless, if the attorneys choose to employ a screen, it is important that it be erected before the involvement of the conflicted attorney in the new representation.[13]

Responding to a Motion to Disqualify

Upon receiving a motion to disqualify, the attorney should promptly notify the client. Attempting to defeat the motion without advising the client is not an acceptable solution.

In addition, if the motion is made by a former client, attorneys should consider providing notice of a potential circumstance to their legal malpractice insurer. Such motions are sometimes followed by either a grievance or a legal malpractice claim.

Finally, assess whether the firm or different counsel should defend the motion to disqualify. Independent counsel, free from the suggestion of economic self-interest, often can more effectively than the attorney press the case for allowing the client to keep its counsel of choice.

Conclusion

Attorneys understandably may feel apprehensive about the threat of a motion to disqualify, given the potential risk and loss of work. However, by understanding the underpinnings of this ethical issue, attorneys will be better prepared to anticipate, respond to, or even avoid motions to disqualify.


Notes

[1] E.g., Celgard, LLC v. LG Chem., Ltd, No. 2014-1675 (Fed.Cir. Dec. 10, 2014) (order disqualifying Jones Day), http://assets.law360news.com/0606000/606910/Celgard-LGC%20Order%20disqualifying%20Jones%20Day.pdf; Utica Mut. Ins. Co. v. Employers Ins. Co. of Wausau, No. 6:12-cv-01293-NAM-TWD (N.D.N.Y. Dec. 18, 2014) (denying motion for summary judgment on issue of whether Hunton & Williams should be disqualified in underlying arbitration), http://assets.law360news.com/0580000/580691/Memorandum%20and%20Order.pdf; Defendant and Counterclaimant Tate & Lyle Ingredients Americas LLC’s Notice of Motion and Motion to Disqualify Squire Patton Boggs (US) LLP; Memorandum of Points and Authorities in Support Thereof, Western Sugar Coop. v. Archer-Daniels-Midland Co., No. 2:11-cv-03473-CBM-MAN (Aug. 26, 2014) (motion to disqualify Squire Patton Boggs), www.law360.com/dockets/download/53fdfac81101ea655a00000b?doc_url=https%3A%2F%2Fecf.cacd.uscourts. gov%2Fdoc1%2F031119586589&label=Case+Filing.

[2] Colo. RPC 1.6.

[3] Brown v. Encompass Ins. Co. of Am., No. 14-CV-01885-RM-BNB, 2014 WL 7177378 at *2 (D.Colo. Dec. 16, 2014) (the court noted that “[m]otions to disqualify opposing counsel are viewed with suspicion”).

[4] People v. Nozolino, 298 P.3d 915, 919 (Colo. 2013) (“Disqualification of a party’s chosen attorney is an extreme remedy and is only appropriate where required to preserve the integrity and fairness of the judicial proceedings.”) (citation omitted).

[5] See, e.g., People v. Shari, 204 P.3d 453, 457 (Colo. 2009) (distinguishing between duties to current clients under Colo. RPC 1.7 and to former clients under Colo. RPC 1.9).

[6] People v. Harlan, 54 P.3d 871, 877 (Colo. 2002).

[7] Id. (quoting People ex rel. Woodard v. Dist. Ct., 704 P.2d 851, 853 (Colo. 1985)).

[8] Myers v. Porter (In re Estate of Myers), 130 P.3d 1023, 1025 (Colo. 2006).

[9] Rodriguez v. Dist. Ct., 719 P.2d 699, 704 (Colo. 1986).

[10] Shari, 204 P.3d at 460-62. See also Harlan, 54 P.3d at 877 (the Court noted that “[i]n determining whether disqualification is warranted ‘the critical question is whether the litigation can be conducted in fairness to all parties’” and explained that “[d]isqualification should not be imposed unless the claimed misconduct in some way ‘taints’ the trial or legal system”) (quoting Fed. Deposit Ins. Co. v. Isham, 782 F.Supp. 524, 528 (D.Colo. 1992)).

[11] By far the majority of successful motions to disqualify are brought on the basis of a conflict of interest with a former or concurrent client or imputation, but attorneys should also be aware that successful motions to disqualify have been brought on the following bases, among others: (1) lawyer as witness, (2) appearance of impropriety, (3) receipt of confidential data, (4) personal interest, (5) violation of the no contact rules, and (6) misconduct with a witness. See Swisher, “The Practice and Theory of Lawyer Disqualification,” 27 Geo. J. Legal Ethics 71, 77 (Winter 2014).

[12] See People ex rel. Peters v. Dist. Ct., 951 P.2d 926, 930 (Colo. 1998).

[13] See People v. Perez, 201 P.3d 1220, 1246 n.11 (Colo. 2009).

Randy Evans is an author, litigator, columnist and expert in the areas of professional liability, insurance, commercial litigation, entertainment, ethics, and lawyer’s law. He has authored and co-authored eight books, including: The Lawyer’s Handbook; Georgia Legal Malpractice Law; Climate Change And Insurance; Georgia Property and Liability Insurance Law; Appraisal In Property Damage Insurance Disputes; and California Legal Malpractice Law. He writes newspaper columns (the Atlanta Business Chronicle, the Recorder, and the Daily Report) and lectures around the world. He served as counsel to the Speakers of the 104th – 109th Congresses of the United States. He co-chairs the Georgia Judicial Nominating Commission. He serves on the Board of Governors of the State Bar of Georgia. He handles complex litigation throughout the world. He has been consistently rated as one of the Best Lawyers in America, Super Lawyer (District of Columbia and Georgia), Georgia’s Most Influential Attorneys, and Georgia’s Top Lawyers for Legal Leaders. Along with numerous other awards he has been named the “Complex Litigation Attorney of the Year in Georgia” by Corporate International Magazine, and Lawyer of the Year for Legal Malpractice Defense in Atlanta. He is AV rated by Martindale Hubble.

Shari Klevens is a partner in the Atlanta and Washington, D.C. offices of McKenna Long & Aldridge LLP. Shari represents lawyers and law firms in the defense of legal malpractice claims and advises and counsels lawyers concerning allegations of malpractice, ethical violations, and breaches of duty. In addition, Shari is the Chair of the McKenna’s Law Firm Defense and Risk Management Practice and is a frequent writer and lecturer on issues related to legal malpractice and ethics. Shari co-authored Georgia Legal Malpractice Law and California Legal Malpractice Law, which address the intricacies and nuances of Legal Malpractice law and issues that confront the new millennium lawyer. She also co-authored The Lawyer’s Handbook: Ethics Compliance and Claim Avoidance, which is an easy-to-use desk reference offering practical solutions to real problems in the modern law practice for every attorney throughout the United States.

Lino Lipinsky de Orlov is a litigation partner in the Denver office of McKenna Long & Aldridge, LLP.  He represents clients in all aspects of commercial litigation, mediation, arbitration, and appeals.  He has developed particular experience in complex business cases, particularly those involving creditor’s rights, real estate, trade secrets, and employment disputes.  Mr. Lipinsky also frequently speaks and writes on legal issues relating to technology, employment law, and ethics.   He is a member of the Colorado Bar Association’s Board of Governors and serves on the Board of the Colorado Judicial Institute.  He is a former President of the Faculty of Federal Advocates.  Among his honors, Chambers USA has recognized Mr. Lipinsky as one of Colorado’s leading general commercial litigators, and he has been included in The Best Lawyers in America.  He received his A.B. degree, magna cum laude, from Brown University and his J.D. degree from New York University School of Law, where he was a member of the New York University Law Review.

 

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

Tenth Circuit: Six-Year Statute of Repose for Breach of Fiduciary Duty in ERISA Contains Exception for Fraud or Concealment

The Tenth Circuit Court of Appeals issued its opinion in Fulghum v. Embarq Corporation on Tuesday, February 24, 2015.

A class of retirees (plaintiffs) of Sprint-Nextel Corporation, Embarq Corporation, or a predecessor or successor of those companies (collectively, defendants) brought suit after defendants altered or eliminated health and life insurance benefits for retirees. Plaintiffs asserted defendants violated ERISA by breaching their obligation to provide vested health and life insurance benefits, breached their fiduciary duty by misrepresenting the terms of multiple welfare benefit plans, and violated the ADEA and state laws by reducing or eliminating health and life insurance benefits. The district court granted summary judgment to defendants on the breach of fiduciary duty claims, the ADEA claims, the state-law age discrimination claims, and some of the contractual vesting claims. Plaintiffs obtained a Rule 54(b) certification and appealed.

The Tenth Circuit examined the applicable insurance contracts and summary plan descriptions (SPDs). Defendants organized 32 SPDs into five groups based on language and coverage similarities, and the district court used these groupings in its analysis of plaintiffs’ claims. Because plaintiffs did not object to the groupings, the Tenth Circuit also based its analysis on the defendants’ classifications.

The first group of SPDs contained 16 documents, each including a statement that the retiree’s coverage ends upon death and a reservation of rights clause where the employer reserved the right to modify or terminate benefits at any time. Plaintiffs argued the plan language was ambiguous because it both offered coverage until death and reserved the right to modify or terminate benefits. The Tenth Circuit found the language unambiguously informed plaintiffs of defendants’ right to modify or terminate coverage, and therefore affirmed the district court’s summary judgment as to group 1.

Next, the Tenth Circuit analyzed the three SPDs in group 2, and found none containing “clear and express language” promising vested benefits. Plaintiffs pointed to language in the SPDs, but the Tenth Circuit found the language more pertinent to amount of benefits and not duration. The Tenth Circuit affirmed summary judgment as to group 2, finding the SPDs unambiguously contemplated termination of the plans.

The third group contained 4 SPDs regarding medical benefits. Plaintiffs claimed entitlement to lifetime benefits because the plans contained language that they “will be insured” and benefits “will continue after retirement.” The Tenth Circuit found the language insufficient to confer lifetime benefits, since it did not clearly and expressly promise unaltered lifetime benefits. The Tenth Circuit also noted that each SPD contained reservation of rights language. The district court’s summary judgment was affirmed as to group 3.

As for the benefits for group 4, the Tenth Circuit found the plaintiffs “wholly failed” to point to any language in the plans promising lifetime benefits. The Tenth Circuit found as to all groups that “no reasonable person in the position of a plan participant would have understood any of the language identified by Plaintiffs as a promise of lifetime health or life insurance benefits,” and that the same reasonable person would have understood defendants’ rationale for amending the plans.

The Tenth Circuit similarly rejected plaintiffs’ attempt to incorporate by reference arguments made in district court regarding why the district court’s denial of plaintiffs’ motion for reconsideration was abuse of discretion, commenting “this is not acceptable appellate procedure.” The Tenth Circuit deemed this argument waived. The Tenth Circuit conceded defendants were only entitled to summary judgment on the claims presented to the district court based on SPDs considered by the district court, and reversed the grant of summary judgment to the extent a class member’s claim for benefits arose from an SPD not presented to the court.

Turning to the breach of fiduciary duty claims, the district court had dismissed all claims as untimely, but the Tenth Circuit found that the district court applied the wrong statutory analysis. The Tenth Circuit reversed the district court’s dismissal of the breach of fiduciary duty claims. The Tenth Circuit examined 29 U.S.C. § 1113, finding the six-year statute of repose undisputed by the parties, but discovered a circuit split on whether § 1113’s statute of limitations applies solely to claims where a fiduciary fraudulently conceals the alleged breach of fiduciary duty or if it applies where the underlying breach of fiduciary duty claim involves allegations of fraud. The Tenth Circuit declined to conflate “fraud or concealment” to “fraudulent concealment” and also declined to consider the clause a separate statute of repose. Instead, the Tenth Circuit found the language to create an exception to the six-year statute of repose for instances when the breach of fiduciary duty resulted from fraud or concealment. The Tenth Circuit found support for its construction in the legislative purpose of ERISA.

Applying its framework to the instant case, the Tenth Circuit did not find evidence of concealment by defendants, and instead looked at whether there was fraud. The district court dismissed plaintiffs’ breach of fiduciary duty claims based on defendants’ claim that the argument was not properly briefed. The Tenth Circuit reversed on this point, finding instead that defendants did not move to dismiss plaintiffs claims on the basis on which the district court granted dismissal, resulting in error.

Finally, the Tenth Circuit addressed plaintiffs claims that the reduction or termination of benefits violated the ADEA because it constituted disparate impact discrimination based on age. Defendants produced evidence of effecting the policy changes based on reasonable factors other than age, and the district court granted summary judgment to defendants. The Tenth Circuit affirmed, finding that the narrow scope of ADEA disparate impact claims only required a showing that defendants’ decision was based on reasonable factors other than age and defendants made that showing.

The Tenth Circuit affirmed in part, reversed in part, and remanded for further proceedings.

Tenth Circuit: Unpublished Opinions, 4/21/2015

On Tuesday, April 21, 2015, the Tenth Circuit Court of Appeals issued two published opinions and three unpublished opinions.

Lundahl v. American Bankers Insurance Co. of Florida

Spreitzer v. Deutsche Bank National Trust Co.

Brown v. McCollum

Case summaries are not provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.