State Bar of Arizona Ethics Opinions
92-03: Conflict of Interest; Former Client
Under facts presented, an attorney who briefly represented a corporation in a stock dispute several years ago may now represent another corporation in an arbitration proceeding against the former client corporation.
B is a corporation engaged in the production of goods. B enters into sales agreements with other companies to distribute its goods. The relationship between B (a former client of the inquiring attorney) and A (a present client of the inquiring attorney) was formalized by an agreement signed by both parties in 1988. At least one clause, which is the focus of the present arbitration proceeding, was negotiated directly between the parties. This clause was not contained in B’s standard sales agreement form. A and B are now involved in a dispute.
This inquiry has been submitted to the committee by an attorney who currently represents A in the arbitration proceeding against B. A number of years ago, this attorney represented B in a dispute involving company stock.1 The total duration of that representation was just over a month. The attorney left the practice of law for a time at the conclusion of his representation of B. It is possible that, during his representation of B, he may have seen a copy of the standard sales agreement form used by companies in B's industry when entering into contracts with sales representatives. This standard sales agreement form was used in preparing B’s sales agreement form. The agreement currently in dispute was not finalized until four months after the inquiring attorney ceased his representation of B, and has been revised twice since then. The clause at issue in the arbitration proceeding is one which was negotiated directly between the parties. B was not actively engaged in business at the time the inquiring attorney represented it. No one connected with B with whom the inquiring attorney dealt during his representation of that company is now with B.
1. What duties are owed by an attorney to his or her former clients?
2. When is disqualification or withdrawal by an attorney appropriate in situations involving his or her former clients?
3. At what point do two representations by an attorney become so substantially related as to merit disqualification of the attorney under ER 1.9?
ETHICAL RULE INVOLVED
ER 1.9. Conflict of Interest: Former Client
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; or
(b) use information relating to the representation to the disadvantage of the former client except as ER 1.6 would permit with respect to a client or when the information has become generally known.
When assessing a conflict of interest involving a former client, an attorney should consider the duty of confidentiality owed by him or her to the former client.2 The duty of confidentiality is the only duty owed by an attorney to a former client. Comment to ER 1.9. The lawyer cannot accept representation which would jeopardize confidential information acquired from the former client unless the client consents. This restriction is codified in ER 1.9. Under this rule, if the two representations are substantially related, it is presumed that confidentiality will be impinged. Similarly, ER 1.9(b) directly prohibits using confidential information to the disadvantage of a former client.3
Consistent with ER 1.9, the inquiring attorney may represent client A against client B if: (a) the relations between the attorney and client B have ceased; (b) the subject matter of the representation of client A is not substantially related to that of the former representation of client B; and (c) the attorney has obtained no confidential communications· or secrets from client B that could be used to B’s detriment in the present matter. Because B is a former client of the inquiring attorney, he must disqualify himself from a representation which is adverse to B only if: (a) the subject matter of the new representation is substantially related to that of the former representation, or (b) the new representation could lead to the use of confidential information obtained from B in the former representation to B’s disadvantage.
On the facts presented by the inquiring attorney, it does not appear that the two matters are substantially related. Neither does there appear to be a danger that confidential information obtained by the attorney from the former client will be used to the former client’s detriment. The attorney’s former representation of B involved a matter unrelated to the subject matter of the present controversy. The former representation involved the settlement of a claim for a portion of the stock of the B company, while the current controversy is a contract dispute between A and B. The only possible crossover between the attorney’s former representation of B and the present matter is that the attorney may have seen a draft of an independent sales representative agreement for use by B.
The inquiring attorney did not prepare the draft agreement involved in the present controversy. Rather, a representative of B prepared it. That person does not clearly recall showing it to the inquiring attorney. The attorney has no recollection of seeing such an agreement. He does not have a copy of that agreement in his file on his former representation of B. The agreement currently in controversy was not finalized until four months after the attorney ceased all involvement with B, and was revised twice thereafter. The clause at issue in the arbitration is one which was negotiated directly between the parties.
All of these factors indicate that confidential information about B is not in jeopardy. Even if the inquiring attorney did see the draft, he did not discuss B company’s intentions or its strategy concerning the agreement with that company; and he had nothing to do with the negotiation of the clause at issue in the arbitration proceeding. There is no substantial relation between the attorney’s two representations. Confidential information acquired by the attorney from client B is not at risk. The inquiring attorney, therefore, has no ethical duty under ER 1.9 to withdraw from representation of client A.
Formal Opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceedings.
©State Bar of Arizona 1992
1 The degree to which the attorney represented B is a matter of some dispute. As this committee is not a fact finder, it is assumed for purposes of this opinion that the facts as presented by the inquiring attorney are accurate.
2 In situations of concurrent multiple representations, the attorney also must consider his or her duty of loyalty to each client when assessing conflicts of interest. ER 1.7.
3 Unless, of course, the information has become generally known.