Consider the following hypothetical: A prominent lawyer has built a robust career prosecuting premises liability lawsuits throughout the state for many years. The lawyer eventually decides to make a change and has an opportunity to work for a firm that defends, rather than prosecutes, such lawsuits.

The law firm at issue represents a large retailer that frequently faces premises liability lawsuits. The law firm wants to hire the departing lawyer, given his or her expertise in the field. But there’s a catch: the law firm currently is involved in lawsuits in which it is defending a retailer against claims made by former clients of the departing lawyer. Can the law firm still hire the lawyer?

It depends. Such a switch often implicates complicated conflict-of-interest issues. The extent of conflicts may make such a move impracticable under the circumstances. But it is not necessarily impossible, and some firms have developed creative solutions to these complex problems.

What Do the Rules Say?

This hypothetical requires consideration of a number of ethical rules. Conflict-of-interest rules are complex; violations of those rules can result in serious punishment by the bar, including in some circumstances disbarment. Thus, it is critical to review and analyze the applicable rules in deciding whether a conflict exists or can be resolved.

ABA Model Rule of Professional Conduct 1.9 generally prohibits a lawyer from using confidential information in a manner detrimental to a former client. Specifically, a lawyer is generally prohibited from representing another person in the “same or a substantially related matter” as any matter involving a former client and where the new client’s interests are adverse to those of the former client.

The rule also prohibits a lawyer from representing a person whose interests are adverse to a client of the lawyer’s former firm in the “same or a substantially related matter” if that lawyer acquired confidential information regarding the matter. Acquiring informed consent from the affected parties may sometimes be an option, depending on the circumstances.

Rule 1.10 addresses imputation of conflicts to a law firm generally when one member lawyer is conflicted. As American Bar Association Formal Opinion 96-400 explained, this rule generally “embodies certain presumptions that are intended to protect a client who has chosen a firm to represent him, automatically ascribing every lawyer in the firm the same duties of loyalty and confidentiality.”

A Creative Solution

So what can a lawyer do, within the context of these rules, if he or she wants to make a career change, as described above? Generally, the lawyer in the hypothetical would not be permitted to assist the new law firm in representing and defending the retailer against claims brought by former clients that the lawyer represented while at his prior firm (Rule 1.9). More critically, the lawyer could create risk that his conflict would impute to his new law firm (Rule 1.10).

Obviously, this could be problematic for a number of reasons, not the least of which is that it could negatively impact the law firm’s ability to continue representing his current (and major) client in the ongoing premises liability lawsuits. The loss of business alone could be enough to end the hiring process before it even begins.

So, some law firms have developed a creative solution for such circumstances. In the hypothetical here, the lawyer’s conflict may be a temporary one. Individual plaintiffs may be unlikely to repeatedly sue the retailer, meaning that the lawyer’s expertise in premises liability lawsuits could become relevant and useful to the hiring firm with time.

However, at present, the lawyer’s prior representation of plaintiffs actively suing the firm’s client could cause the hiring firm’s business to grind to a halt. Although the use of ethical walls could be helpful in such a scenario, the depth and significance of the conflict could make that impracticable.

One option is for the lawyer to temporarily establish his or her own separate firm, before entering into a business relationship with the hiring firm. In that way, the lawyer and the hiring firm could jointly represent clients on matters in which no conflict of interest exists.

And the hiring firm could continue to solely represent the client in matters in which a conflict of interest might otherwise preclude the lawyer’s involvement. This helps preserve the firm’s existing business while allowing the lawyer to associate with the firm for non-conflicted work. Then, when the matters that present conflict issues are resolved, the lawyer can dissolve the separate firm and formally join the hiring firm.

Key Considerations

Most lawyers and firms engaging in such a venture will take great care to design the relationship and to implement procedures so that there is a clear and definitive separation between the established firm and the new entity. This is helpful to prevent cross-contamination of conflicted matters.

This could include separate client databases with restricted access—both virtually and physically—as well as separate firm functions, including separate staff, finance departments, IT systems, human resources and office space.

While some firms have built in agreements to temporarily lease staff and use of existing systems in order to reduce the overhead cost, it is important that the clear division between the two firms remains. The need for separation is critical to ensure that the lawyer’s conflict is not imputed to the hiring firm and that the lawyer’s conflict does not taint the hiring firm’s other representations.

Given the complex undertaking, many firms will first consider if the juice is worth the squeeze. The law firm may also include protections in the business arrangement, such as reasonable non-compete and notice clauses, in the event the relationship sours. To navigate these issues, some firms will consult outside counsel to make sure the arrangement complies with not only the local ethical rules, but any other financial or regulatory laws that may be applicable.

In the end, with proper preparation and foresight, such arrangements may help a lawyer meet her or his career goals while ensuring compliance with the ethical rules.