Thursday, October 11, 2012

Covington and Burling disqualified in case against former client for conflict in violation of Rule 1.9

Back in August I posted a story about the lawsuit filed by 3M Corporation against the law firm Covington & Burling arguing that the law firm violated its duties to 3M when it allegedly dropped 3M in one matter to accept representation of another client (the state of Minnesota) against 3M.  Go here for that original post.

Meanwhile, 3M also filed a motion to disqualify Covington from representing the State of Minnesota in the underlying case and today the court has granted the motion to disqualify.  Interestingly, however, the basis for the ruling is not that Covington violated the "hot potato doctrine" (which penalizes a firm for dropping a client to clear the way to accept the representation of a new client) as argued by 3M.  The court simply held that Covington violated rule 1.9 on successive conflicts of interest.  Either way, 3M has scored a big win.

It remains to be seen what effect the disqualification order will have on the civil claim, but I am sure 3M will try to get some mileage out of the strong language by the judge who concluded that “Covington has exhibited a conscious disregard for its duties of confidentiality, candor, full disclosure, and loyalty to 3M..."

Interestingly, in disqualifying Covington, the judge goes into two different types of analysis used in cases of former client conflicts.

According to Rule 1.9, "[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."

Thus, the big question is whether the previous representation of 3M was substantially related to the current representation of the state.  If so, Covington would be prevented from continuing to represent the state.  Following the generally accepted analysis in similar cases, the judge stated that matters are “substantially related” if there 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.”

To address the issue, the judge examined the character and content of the previous representation of 3M and concluded that Covington had represented 3M in the past in matters that were substantially related to the case in which it was now representing the State of Minnesota against 3M.  The judge therefore concluded that "Covington has “switched sides” by representing a client who is now suing its former client" and that "[b]y representing the State, Covington will benefit by contradicting the very positions it had long advocated on 3M’s behalf."  The judge, thus, concluded that "[b]ecause a lawyer may not use any information “relating to” a prior representation to the detriment of a former client, disqualification is necessary where an attorney provided legal services to a former client relative to matters substantially related to the subject matter of the present suit."

Once this conclusion is reached, typically a court would have enough reason to justify disqualifying a firm, unless the firm (and its client) could convince that there are other reasons that show disqualification would be too onerous on the client at that point.  Covington may have an argument along those lines because 3M waited so long to protest its representation of the state. I expect Covington to argue that on appeal.

But the judge did not stop there because the case law in the state of Minnesota appears to be slightly different from that in other states.

It appears that the analysis used by courts in Minnesota combines the previously mentioned analysis related to whether the cases are substantially related with the analysis typically used for cases in which the conflict is created by a lawyer who moves from one firm to a new firm.  In a case like that, there is a presumption that the moving lawyer acquired confidential information about his or her former clients (left behind in the old firm) (the so-called "first presumption") and that he or she will share (or has shared) that information with the new firm (the "second presumption").  In support of its opposition to a motion to disqualify, the new firm can try to rebut either presumption.  If unable to do so, the firm would be disqualified from representing an interest adverse to those of a former client of the new attorney joining the firm.

Using this analysis, the judge also found that Covington should be disqualified. The judge found that the State (and Covington) simply could not rebut the presumption that Covington had received relevant confidential information from 3M nor the presumption that Covington shared that confidential information within the firm because Covington admitted to not imposing screens or other protections to safeguard 3M’s information.

I don't think this second part of the judge's analysis necessarily relevant to the facts of the case (because there was no lawyer moving from one firm to another), but it seems to be part of the analysis used in Minnesota and in the end the result is the same.

As expected, Covington has expressed it disagrees with the court's conclusions.  Timothy Hester, chair of Covington’s management committee stated: “The State of Minnesota has been a client of this firm on environmental matters since 1995.We respectfully disagree with the court’s ruling. We believe 3M failed to identify an actual conflict of interest and its attempt to disqualify the firm should in any event be barred because it came 15 months after the case was filed. 3M is a former firm client and the State of Minnesota’s current environmental case against 3M is not substantially related to a food packaging matter that we handled for 3M many years ago.  Our client, the State of Minnesota, will be weighing its options, including an immediate appeal.”

You can read the order in full by going here.  For more on the story go here and here.