Ethics Opinion 343
Application of the “Substantial Relationship” Test When Attorneys Participate in Only Discrete Aspects of a New Matter
A lawyer who has formerly represented a client in a matter is prohibited from representing another person in the same or 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. Two matters are “substantially related” to one another if there is a substantial risk that confidential factual information as would normally have been obtained in the prior representation is useful or relevant in advancing the client’s position in the new matter. Subject to certain conditions, a lawyer may limit the scope of the new representation such that factual information normally obtained in the prior matter would be legally irrelevant to the advancement of the current client’s position in the new matter. Specifically, by agreeing only to represent a client as to a discrete legal issue or with respect to a discrete stage in the litigation, a lawyer may be able to limit the scope of the representation such that the new matter is not substantially related to the prior matter. Restrictions on the scope of the representation that effectively ensure that there is no substantial risk that confidential factual information as would normally have been obtained in the prior representation would be useful or relevant to advance the client’s position in the new matter may, under certain circumstances, be sufficient to avoid a conflict of interest.
Applicable Rules
- Rule 1.2 (Scope of Representation)
- Rule 1.9 (Conflict of Interest: Former Client)
- Rule 1.10 (Imputed Disqualification: General Rule)
Inquiry
We have received a number of inquiries that present the general question whether lawyers may limit their participation in a matter in such a way that the current matter is not substantially related to a prior matter in which they represented a former client whose interests are adverse to those of the current client. In other words, even though the overall representation of the current client may be substantially related to the prior representation, we have been asked whether lawyers may nonetheless limit their own participation in the new representation such that the specific matter on which they are representing the current client is not substantially related to the prior matter in which they had represented the former client.
In considering this important question, we find it useful to distinguish between two ways in which a lawyer may be able to limit her participation in a case: First, a client may want a lawyer to represent it as to a discrete legal issue as part of a larger legal representation whose interests are adverse to the lawyer’s former client, where the specific legal issue is one that is entirely distinct from the matter in which the lawyer (or the lawyer’s law firm) had previously represented a former client. For example, Lawyer is an expert in patent law. Client hired Lawyer to advise and represent Client in obtaining all of the rights under a particular patent through an assignment from the original patent holder. Sometime later, Client approaches Lawyer to represent it in a patent infringement suit against Company. However, Lawyer’s law firm has previously represented Company in a different patent infringement case involving the same underlying technology. Lawyer informs Client that she cannot participate in the patent infringement action against Company but that she could represent Client on the limited question whether Client’s own patent had been properly assigned to it. In other words, Lawyer would represent Client only to the extent that Company asserts that Client lacks standing to pursue the infringement claim on the grounds that the patent had not been properly assigned. Client would hire other lawyers to prosecute its infringement claims. Given that Lawyer’s participation would be limited only to whether the patent had been properly assigned to Client rather than to whether Company had infringed that patent, would such a limited representation be permissible under D.C. Rule 1.9 even without Company’s informed consent? If so, what precautions or conditions would Lawyer need to take into account?
Second, a client may want to hire a lawyer to represent it as to a discrete stage in the litigation – one that presents a pure question of law that would not involve the lawyer in any factual issues. For example, Lawyer has been asked to represent Client who is interested in filing a petition for certiorari with the United States Supreme Court to challenge a decision of the court of appeals on the grounds that the appellate court lacked jurisdiction over the particular claim. Lawyer and her firm did not represent Client at trial, where Client had filed suit against Company. Some years earlier, other lawyers in Lawyer’s firm had defended Company in litigation involving some of the same facts as the current litigation. Lawyer proposes to limit the scope of her representation of Client to preparing a petition for certiorari, merits briefs, and oral argument in the Supreme Court to raise a narrow question of appellate jurisdiction. The scope of her representation would be limited to the Supreme Court proceedings; she would not represent Client should the matter be remanded or, for that matter, should there be any settlement discussions or other proceedings relating to the underlying litigation. Other lawyers represented Client in the lower-court proceedings and would remain involved with the case. Lawyer believes that the issues to be presented at this stage of the proceedings are distinct matters of federal law and that nothing that Lawyer’s colleagues might have learned in the prior litigation would be relevant or useful to the legal arguments presented to the Supreme Court. Assuming Client is willing to consent to the circumscribed scope of Lawyer’s representation, would it be permissible for Lawyer to represent Client in this matter, consistent with her obligations under the Rules of Professional Conduct?
Background
The application of the “substantial relationship” test is one of the most difficult and contentious issues that a lawyer must face when considering whether he or she may represent a client whose interests are adverse to those of a former client. On one hand, by limiting the scope of prohibited matters to those that are the same as or substantially related to the matter in which the lawyer represented the former client, D.C. Rule 1.9 makes clear that it does not intend to prohibit all representations that may be adverse to the interest of a former client. In other words, there are clearly some matters – those that are neither the same as nor substantially related to the prior matter – that a lawyer may take on even if doing so requires the advancement of interests that are adverse to those of a former client. This clearly reflects a policy judgment that clients ought generally to be free to engage the lawyers of their choice. On the other hand, D.C. Rule 1.9 also reflects the judgment that a lawyer should not be permitted (without the former client’s informed consent) to take on a matter adverse to the interests of the former client when doing so would put the lawyer in a position of using knowledge obtained in the prior representation against the interests of the former client.
D.C. Rule 1.9 provides that “[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.” According to a new comment that became effective in 2007, matters are “substantially related” for purposes of this rule
if they involve the same transaction or legal dispute or if there otherwise 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. . . A conclusion about the possession of such information may be based on the nature of the services the lawyer provided the former client and information that would in ordinary practice be learned by a lawyer providing such services.
D.C. Rule 1.9, Comment [3] (emphasis added).
The commentary to D.C. Rule 1.9 expressly incorporates by reference District of Columbia and federal case law on the substantial-relatedness test, see, e.g., Brown v. District of Columbia Board of Zoning Adjustment, 486 A.2d 37 (D.C. 1984) (en banc); T.C. Theatre Corp. v. Warner Brothers Pictures, 113 F. Supp. 265 (S.D.N.Y. 1953). The restrictions imposed by D.C. Rule 1.9 are grounded in the obligations imposed by D.C. Rule 1.6 to protect client confidences and secrets. See D.C. Ethics Op. 239 (1993). Commentators agree that the function of the substantial-relationship test is to protect client confidences. See Charles W. Wolfram, Former-Client Conflicts, 10 Geo. J. Legal Ethics 677, 685-89 (1997). According to Geoffrey C. Hazard, Jr. and W. William Hodes, “most modern authority holds that ‘substantial relationship’ is itself essentially a shorthand for not abusing the former client’s confidences.” The Law of Lawyering § 13.5 (Aspen 3d ed. 2000).1
The leading case in the District of Columbia regarding the substantial-relationship test is Brown v. District of Columbia Board of Zoning Adjustment. The Brown case involved a series of transactions concerning the same parties, the same property, and similar objectives. Petitioners moved to disqualify two former D.C. Corporation Counsel attorneys who had represented the District of Columbia in connection with issues involving the property during their government service. The Brown opinion heavily relied on the analysis in Westinghouse Electric Corp. v. Gulf Oil Corp., 588 F.2d 221, 225 (7th Cir. 1978). According to Westinghouse, two matters will be substantially related when confidential client information provided to counsel in a prior matter “is relevant to the issues raised in the litigation pending against the former client.”2 Id. at 225. Moreover, when evidence demonstrates that counsel may have had access to information that might be relevant or useful in the second case, “[r]ebuttal evidence must therefore focus on ‘the scope of the legal representation’ involved in each matter and not on the actual receipt of ... information.” Id. at 224 (cited with approval in Brown, 486 A.2d at 50).
In Brown, the factual overlap between the transactions was sufficient for the court to conclude that the moving party had established a prima facie case for disqualification, shifting the burden of rebutting the inference to the former Corporation Counsel attorneys and their law firm. The court ultimately held that the former government attorneys successfully rebutted the inference by demonstrating that none of the information presented in the earlier proceedings would have benefited the property owner in the current proceeding. Thus, the court affirmed the finding of the Board of Zoning Appeals that disqualification was not required.
There are two additional decisions by courts in the District of Columbia that are relevant, and both of them involve former government officials. In In re Sofaer, 728 A.2d 625 (D.C. 1999), the respondent was disciplined for representing the government of Libya in a matter in which he participated as Legal Advisor of the State Department. The respondent claimed that the substantial-relationship test did not apply because of the limited scope of the current representation. The court addressed that argument in the following terms:
Respondent insists that he stayed clear of that overlap by restricting the terms of his agreement to represent Libya so as to “assum[e] Libya’s culpability for the [Pan Am 103] bombing.” A lawyer may, of course, limit the objectives of a representation with client consent. Rule 1.2(c). But respondent’s retainer agreement exemplifies why, in our view, limiting the private representation rarely will succeed in avoiding the convergence addressed by Rule 1.11(a). While stating that “[the firm’s] efforts will not include substantial activities as litigators but rather would be limited to activities associated with agreed upon measures, including consensual dispositions,” the agreement emphasized that “[m]easures will be taken only with your [i.e., Libya’s] prior consent, and without admission of liability” (emphasis added). The proposed activities included “investigating the facts and legal proceedings, preparing legal analyses, providing legal advice and proposing legal steps to deal with” the “ongoing civil and criminal disputes and litigation” stemming from the destruction of Pan Am 103 – all clearly features of a comprehensive attorney-client relationship. We do not question the sincerity of respondent’s belief that the representation could be insulated, factually and ethically, from the investigation and diplomatic efforts of which he had been part. The “substantially related” test by its terms, however, is meant to induce a former government lawyer considering a representation to err well on the side of caution. Respondent did not do so.
Id. at 628.
In United States v. Philip Morris Inc., 312 F. Supp. 2d 27 (D.D.C. 2004), the Government had brought a fraud and RICO suit against nine cigarette manufacturing companies and two tobacco trade associations. A former Department of Justice attorney, who had provided legal advice to the FDA and HHS during the Youth Tobacco rulemaking proceeding and then participated on behalf of the government in defending the regulation in court, filed a motion to intervene on behalf of an Australian affiliate of British American Tobacco in the fraud and RICO case. In ruling on the government’s motion for disqualification, the court was persuaded that information obtained by the former government attorney in the FDA litigation would assist him in developing strategy and arguments to rebut the Government’s claims, and the court refused to accept that the risk of misusing Government information was nonexistent. Id. at 42-43. Instead, citing the Brown decision, the court said that any case involving close questions about whether particular confidences would be pertinent require disqualification of former government lawyers. Id. at 45.3
Discussion
The D.C. Rules generally permit a lawyer, with the informed consent of the client, to “limit the objective of the representation.” See Rule 1.2(c).4 We have expressly recognized “that a client may, if fully informed and freely consenting, contract for limited service arrangements with a legal services provider.” D.C. Ethics Op. 330 (2005). “The objectives or scope of services provided by the lawyer may be limited by agreement with the client or by terms under which the lawyer’s services are made available to the client. For example, a retainer may be for a specifically defined purpose.” Rule 1.2, Comment [4]. The Westinghouse and Brown opinions both recognize that the scope of representation provided to a client is a critical factor in determining whether two matters are substantially related.
In discussing joint representation of clients, Comment [4] to D.C. Rule 1.7 explains that lawyers may limit their representation to avoid adversity, such as by agreeing to represent multiple clients in the liability phase of a case, but not in the damages phase. Other ethics committees and authorities have acknowledged that limiting the scope of representation may eliminate adversity, such that a lawyer can continue representing a client whose position is otherwise adverse to a former client. See ABA/BNA Lawyers’ Manual on Professional Responsibility 51:221 (“Adversity may sometimes be avoided by limiting the scope of the current representation to avoid clashing with a former client’s interests, as long as the current client gives informed consent.”); Wolfram, supra, at 736; see also New York City Bar Op. 2001-3 (explaining that a lawyer may be able to avoid adversity by limiting the representation to certain claims or by helping the client find other representation for issues in a case that would cause a conflict).5 The Restatement likewise suggests that “the lawyer may limit the scope of representation of a later client so as to avoid representation substantially related to that undertaken for a previous client.” Restatement of the Law Governing Lawyers at § 132 cmt. E (2007). The Restatement illustrates this comment with an example in which a lawyer agrees to restrict the scope of representation of Client B so that confidential information obtained from Client A in a prior representation would not be relevant to the subsequent representation. With that limitation, the representation of Client B would not be adverse.
Both of the categories discussed below present an example of how a lawyer may avoid creating a conflict of interest under D.C. Rule 1.9 by participating in a discrete aspect of a particular matter.6 However, it is critical to note that these examples present a rather idealized set of circumstances. The fact that a conflict of interest may potentially be avoided does not, of course, mean that such conflicts can actually be avoided under a specific set of facts that a lawyer may actually face. We shall, therefore, endeavor to identify below which facts are important in determining whether a conflict under D.C. Rule 1.9 can actually be avoided.
A. Limiting Participation by Representing a Client Only on a Discrete Legal Issue
Our first category involves a lawyer who is hired only to represent a client on a discrete legal question. Our example involves Lawyer, whom Client would like to hire on the question of defending Client’s patent against claims by the defendant Company that the patent had not been properly assigned to Client in advance of Client’s bringing suit. Because Lawyer’s law firm had previously represented Company in a different case involving infringement claims based on the same underlying technology, Lawyer has sought to limit the scope of her representation so that she represents Client only on the assignment question. Client would be separately represented by other counsel on the claims that Company has infringed Client’s patent.7
To the extent that Lawyer’s participation in the lawsuit can genuinely be limited to the assignment issues, Lawyer’s participation in the lawsuit would not violate D.C. Rule 1.9. The matter on which Lawyer represents Client is not substantially related to the matter on which Lawyer’s law firm had previously represented Company. We caution, however, that Lawyer must ensure that her participation in the case never extends to the patent infringement issues. Indeed, it would be essential to maintain wholly separate litigation teams to handle the two sides of this case. Such a structure is likely to be unusual, and Lawyer would be expected to explain all of this prior to obtaining Client’s consent. But if Client is prepared to accept the costs and inefficiencies that such a rigid and artificial division would require – and assuming, of course, that Lawyer can provide competent representation under these conditions – such a limited representation would not run afoul of D.C. Rule 1.9.
B. Limiting Participation by Representing a Client Only at a Discrete Stage of Litigation
The second category of ways in which the scope of representation may be limited involves a lawyer’s participation at a discrete stage in litigation. Client has sought to hire Lawyer for her expertise in Supreme Court litigation against Company where the only issue is a pure question of law that does not depend on the underlying factual record for resolution. Lawyer’s law firm had previously represented Company in a matter that would be considered substantially related to the underlying litigation in this case. In other words, confidential information that would normally have been obtained by lawyers at Lawyer’s law firm would have been relevant or useful to counsel for Client at trial or in assessing the value and wisdom of a settlement. So, without Company’s consent, neither Lawyer nor her law firm could have represented Client at trial. But the question is whether the proposed limitations on the scope of the representation at this late stage in the litigation are sufficient to rebut the presumption that these two, factually related matters are, in fact, “substantially related” to one another within the meaning of D.C. Rule 1.9.
Lawyer and Client have agreed that Lawyer’s engagement is limited to raising a question of federal jurisdiction in challenging the lower court’s decision. This is a pure legal issue that was never part of the prior representation provided by Lawyer’s firm to Company. Given the limited scope of Lawyer’s representation, there is no basis to conclude that confidential information of Company that is imputed to Lawyer would be relevant to or useful in Lawyer’s representation of Client.8 Because the limitations on the scope of Lawyer’s representation have eliminated virtually any risk that Company’s confidential information would be used by Lawyer, we conclude that the two matters are not substantially related to one another and that D.C. Rule 1.9 does not, therefore, apply.9
However, we note that even in litigation before the Supreme Court on what appears to be a purely legal issue, confidential factual information may turn out to be useful to a lawyer. Supreme Court cases are sometimes about narrow procedural questions – e.g., whether a case must be heard in state court rather than federal court – or about discrete, threshold legal issues – e.g., whether a particular statute gives a plaintiff standing to sue. But, at other times, the cases are about whether a particular party is entitled to prevail on the facts as presented and developed at trial. Even if such facts are “frozen” by the time the case reaches the Supreme Court, where a lawyer has (or is presumed to have) relevant information about the underlying facts from a prior representation of the adverse party, D.C. Rule 1.9 is likely triggered even if her representation were limited to the Supreme Court stage of the litigation. In other words, whether or not a lawyer may avoid a conflict under D.C. Rule 1.9 by limiting her participation to a discrete stage in the litigation will depend, at least in part, on the nature of the legal question that she is asked to present. The confidential information in the hands of other lawyers in Lawyer’s firm, which is imputed to Lawyer and must therefore be presumed to be in Lawyer’s possession, could well prove significant in the way she argues the case. In such situations, the matters would indeed be substantially related, and her representation would be improper unless the former client consents. But there are certainly those cases that turn on discrete, interlocutory questions of law that have nothing to do with the underlying merits of the case, and we believe that a lawyer’s limiting the scope of her representation to such issues would likely not present a problem under D.C. Rule 1.9. We are mindful of the Court of Appeals’ admonition in In re Sofaer, that even if a lawyer sincerely believes that his or her representation “could be insulated, factually and ethically,” from the earlier representation, the belief might be mistaken. In that case, “[t]he ‘substantially related’ test by its terms, ... is meant to induce a ... lawyer considering a representation to err well on the side of caution.” 728 A.2d at 628.
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Even if it is permissible generally to restrict a representation to avoid substantial overlap with a prior representation, it may not be possible in a particular case. Private lawyers, like former government lawyers, should “err well on the side of caution.” Id.10 We have considered two different categories in which a lawyer may avoid the applicability of D.C. Rule 1.9 – by agreeing only to represent a client as to a discrete legal issue and by agreeing to represent a client with respect to a discrete stage of the litigation. While we recognize that these categories can, under appropriate conditions, allow for lawyers to represent clients without violating D.C. Rule 1.9, we also appreciate that it may prove very difficult for lawyers to do so in fact. Where confidential information from the prior representation could be useful in or relevant to the new representation – however it may be limited or circumscribed – then the substantial-relationship test is satisfied, and the new representation may not proceed without the consent of the former client.
Inquiry No. 07-03-22
Published: February 2008
1. The Restatement notes that a legal position taken in representing a former client ordinarily is not considered to be a substantially related matter unless the underlying facts are also related. See Restatement (Third) of the Law Governing Lawyers § 132 cmt. D (2007). Thus, for example, a lawyer can argue that a statute is constitutional on behalf of one client and is unconstitutional in representing a subsequent client in a case not involving the former client.
2. As applied to a former government attorney, the Brown court broadened the test and deemed two matters to be substantially related if the confidential information of the former client was relevant or useful in the current representation. Brown, 486 A.2d at 49.
3. Although not directly relevant, Laker Airways Limited v. Pan American World Airways, 103 F.R.D. 22, 38-42 (D.D.C. 1984), contains a useful discussion of the applicability of the substantial-relationship test under the predecessor of D.C. Rule 1.9. In Laker Airways, Judge Greene concluded that there was not a substantial relationship between a lawyer’s representation of an airline on matters concerning the general antitrust immunity of the International Air Transport Association (IATA) and the same lawyer’s later antitrust suit against the same airline for conspiring at an IATA conference to engage in illegal price fixing. Although both representations “involve[d] IATA, its organization, operation and activities,” Judge Greene held that these facts were mere “resemblances” that were “general and superficial” and insufficient to satisfy the substantial-relationship test. Id. at 40.
4. Similarly, the ABA’s Model Rule 1.2(c) provides that “[a] lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.” Cf. D.C. Rule 1.2 cmt. 5 (“An agreement concerning the scope of representation must accord with the Rules of Professional Conduct and other law. Thus, the client may not be asked to agree to representation so limited in scope as to violate Rule 1.1, or to surrender the right to terminate the lawyer’s services or the right to settle litigation that the lawyer might wish to continue.”). Moreover, as required by D.C. Rule 1.4(b), a lawyer must explain to the client the benefits and drawbacks of the limited scope relationship so that the client has sufficient information to make an informed decision regarding the representation. Cf. ABA Comm. On Ethics and Prof’l Responsibility, Formal Op. 07-447 (2007).
5. New York City Bar Op. 2001-3 (“[T]he scope of a lawyer’s representation of a client may be limited in order to avoid a conflict that might otherwise result with a present or former client, provided that the client whose engagement is limited consents to the limitation after full disclosure and the limitation on the representation does not render the lawyer’s counsel inadequate or diminish the zeal of the representation. An attorney whose representation has been limited, however, must be mindful of her duty of loyalty to both clients. Where the portion of the engagement to be carved out is discrete and limited in scope, such a limitation may well resolve the conflict presented.”).
6. Although we identify and discuss two specific examples of how a lawyer may limit the scope of representation to avoid creating a conflict of interest under D.C. Rule 1.9, we do not mean to suggest that these are the only two ways in which this issue may arise.
7. We do not address here the separate issues that could arise when a lawyer’s past work (or the past work of others in the lawyer’s firm) becomes an issue in litigation between the lawyer’s client and a third party and the lawyer is asked to represent the client in such litigation. Such a representation may raise issues under D.C. Rule 1.7(b)(4) implicating the lawyer’s own business or personal interests as well as under D.C. Rule 3.7 concerning the lawyer’s obligations as a potential witness.
8. Although we have been assuming that the confidential information would not be relevant or useful in Lawyer’s representation, it would certainly be advisable for the other lawyers in Lawyer’s firm who were privy to such information from the prior case to avoid any involvement in the litigation before the Supreme Court. Although not required under our rules, such precautions would certainly make it easier for Lawyer to prove, for example, that no confidences or secrets were, in fact, disclosed or used in violation of D.C. Rule 1.6.
9. Our conclusion here does not apply to discrete stages of the same matter. In other words, if Lawyer’s law firm had represented Company at trial in the same case (as opposed to having represented Company in an entirely separate matter), Lawyer could not argue that she is free to represent the other side against Company in the Supreme Court on the grounds that the issues before the Court are entirely distinct from those on which Lawyer’s colleagues had represented Company at trial. In such a circumstance, we believe that a lawyer who switches sides in the same case (albeit at a later stage where the issues are different) triggers the prohibitions of D.C. Rule 1.9, regardless of how a lawyer might limit the scope of representation in the subsequent stage of the matter.
10. We do not intend this Opinion to address the application of the substantially related test to the specific situation of former government lawyers under D.C. Rule 1.11(a). Although we acknowledge that D.C. Rules 1.9 and 1.11 use the same terms to describe the relationship between former and current matters, cases involving the disqualification of former government lawyers also raise concerns about the possible misuse of information obtained under government authority and about actions taken to enhance the government lawyer’s private sector employment prospects. See Brown, 486 A.2d at 43, cited with approval Philip Morris, 312 F. Supp. 2d at 38. In light of these and other concerns unique to the former government lawyer context, we leave for another day the question whether former government lawyers may limit the scope of their subsequent representation and thereby avoid a conflict of interest under D.C. Rule 1.11(a).
