Imputed Disqualification: Challenges of Suing Former Clients

Posted: November 27, 2018

A recent case highlights the importance of a thorough and comprehensive conflict check process at law firms. In RehabCare Group East, Inc. v. Village Health Care Management, LLC, a magistrate judge recommended the disqualification of a lawyer and law firm because another lawyer within the firm had previously represented one of the defendants in the current matter.  This case demonstrates the importance of thorough and vigorous conflict of interest procedure by attorneys to avoid disqualification based on an imputed conflict. This case illustrates what happens when a law firm’s conflict process fails to uncover a conflict. Because of the nature of the conflict, the law firm could not utilize screening to shield itself from the conflict, and the magistrate judge recommended immediate disqualification.

Defendant Disqualifies Plaintiff’s Law Firm

One of the corporate defendants in the case moved to disqualify the plaintiff’s law firm after it recognized that the firm had previously represented it in an unrelated case. In support of its motion, the defendant provided the court with extensive proof of email correspondence between a former partner at the firm and officers at the defendant corporation. The court examined the emails and found that while they did not reveal any sensitive or confidential information, the emails likely included conversations about negotiation strategy and the defendant’s financial condition.

During the time the court was considering the disqualification motion, the attorney who previously represented the defendant and was the focal point of the motion retired from practicing law.  The retirement caused the parties to argue whether the proper rule to apply under Rule of Professional Conduct 1.10 was subsection (a), which applies to currently associated lawyers, or subsection (b) which applies to formerly associated lawyers. The district court found that the proper standard was under Rule 1.10(a), the stricter subsection.

Rule of Professional Conduct

Ultimately, the magistrate judge determined that the stricter subsection Rule 1.10(a) applied. Because the court found that the defendant had conveyed information concerning negotiation and financial strategies to the original attorney and that this information would likely be relevant to the litigation and negotiation strategy employed in the current case. Because of the imputation rules set out in 1.10(a), this knowledge was imputed to the current lawyer (from the same firm) therefore disqualifying the firm from representing the plaintiff.

The court rejected the law firm’s argument that the primary attorney’s retirement impacted the result and held that no screening would save the representation.

lawyer performing a conflict check on a new client

The Need for Strong Conflict Checks

This case specifically highlights the importance of a strong initial conflict check procedure before undertaking representation in litigation. It is clearly in the best interest of attorneys and law firms to run robust conflict checks as part of an initial conflicts system to identify party information to thoroughly enable the firm to do a comprehensive conflict check in order to avoid imputed disqualification and potential malpractice exposure.