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| 2 minutes read

Vicarious disqualification of in-house legal department

Although unusual, we have all heard of an attorney being disqualified from representing a client. We are also familiar with that disqualification extending to an entire firm. But what you very rarely see is vicarious disqualification extending to an entire in-house legal department. This California case jumped out for that reason – an in-house attorney being disqualified from representing her employer in the matter, with any in-house lawyer associated with the tainted attorney in the same “department, division or office” also being disqualified.

The facts leading up to the ruling are straight-forward and act as a reminder to all legal departments on-boarding experienced counsel. Here the attorney in question worked for plaintiff’s litigation counsel and billed time to pre-suit investigation involving the patent in question. Prior to plaintiffs' filing suit, the attorney left the firm and accepted a job as a senior intellectual property in-house counsel for the soon-to-be-defendant. The attorney took steps to notify the firm of her new employer and indicated that she would not be involved in any matters involving that particular client. 

Shortly after her transition, the attorney’s new employer was sued. Plaintiffs’ counsel promptly sent a letter to defendant’s litigation counsel, flagging the conflict and requesting confirmation of proper ethical screening within defendant. Defendant’s general counsel confirmed and certified that the company’s legal department had been instructed to screen the tainted attorney from the matter. However, no formal waiver was obtained.

Less than three months after the complaint was filed, defendants moved to transfer the action from the District of Delaware to the Northern District of California. Plaintiffs’ counsel reminded defendant of the conflict of interest and stated that if the matter was transferred to the Northern District of California that it reserved its rights to pursue all available remedies including the right to move to disqualify defendant’s legal department. Upon resolution of the venue issue, plaintiffs filed their disqualification motion, and the motion was granted.

Disqualification involves conflicting ideals: the right to counsel of choice vs. the need to ensure fair and impartial representation from lawyers by their maintaining client confidences. 

Lawyers are prohibited from taking on a representation adverse to a former client where there is a substantial relationship between the new representation and the former representation. And, as noted in this case, such conflicts may be imputed to an entire firm or legal department. Before on-boarding lateral lawyers, identify and resolve potential conflicts. Where a lateral lawyer has a conflict, an effective written consent, or waiver, may be needed. And a timely and effective screen will be important. In addition to isolating the lateral lawyer from any participation in the matter at issue, a timely and effective screen may prevent the imputation of the lateral lawyer’s conflict, depending on the circumstances and the applicable rules.  Here the Court found defendant’s implicit waiver theory to be unpersuasive because absent an affirmative waiver by the affected client, defendant’s had no way of knowing whether the screening procedures by themselves were not sufficient.

In this case, the extent of the disqualification is not fully set. The judge has asked the parties to submit a joint stipulation containing the preventative measures to effect the disqualification. The judge understands the significance of a legal-department disqualification and requested that any proposed measures be “no more than absolutely necessary and must be ‘prophylactic, not punitive,’ in nature.”