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Introduction
DR 5-105(D) of the Code of Professional Responsibility ("CPR") provides:
If a lawyer is required to decline employment or to withdraw from employment under a Disciplinary Rule, no partner or associate or any other lawyer affiliated with him or his firm may accept or continue such employment.
Rule 1.10(a) of the proposed Model Rules of Professional Conduct(1) ("MRPC") similarly provides:
While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rule 1.7, 1.8(c), 1.9 or 2.2.
As written, these ethical precepts are simple and far-reaching. Unfortunately, they have proven to be too far-reaching; and for years courts and ethics commentators have struggled to reconcile the unyielding language quoted above with other societal goals and with the realities of law practice.(2)
In an effort to avoid imputed disqualification, law firms in both public and private settings have attempted to create a screen or "Confidentiality Wall"(3) around one or more attorneys who themselves would be ethically prohibited from working on a given matter. Over the past few years, the CBA Ethics Committee has received an increasing number of inquiries as to when construction of a Confidentiality Wall is proper and what factors to consider in constructing such a Wall. We attempt by this Formal Opinion to provide some overall guidance on these issues.
At the outset, the Committee notes that these issues implicate a number of important legal and social considerations (which at times may conflict) such as a person's right to counsel of his or her choice, a client's right to confidentiality and loyalty in his or her relationship with legal counsel, and the right of attorneys to move from job to job. E.g., Manning v. Waring, Cox, James, Sklar and Allen, 849 F.2d 222, 224 (6th Cir. 1988); Nemours Foundation v. Gilbane, Aetna, Federal Insurance Co., 632 F.Supp. 418, 425 (D. Del. 1986); Parker v. Volkswagenwerk Aktiengesellschaft, 245 Kan. 580, 781 P.2d 1099, 1104 (1989) (all discussing the various factors to consider in analyzing whether a Confidentiality Wall can avoid a firm's imputed disqualification). Moreover, these issues oftentimes arise in the context of a contested motion to disqualify an opposing party's law firm, and thus are frequently analyzed in a highly charged setting in which the moving party's motives are just as much a matter for judicial scrutiny as the subject attorney's behavior.(4) See, Manning, 849 F.2d at 224 (reporting that motions to disqualify opposing counsel are "becoming an increasingly popular litigation technique."); cf. this Committee's Ethics Opinion No. 78 (adopted June 18, 1988) (regarding the ethical considerations to bear in mind in seeking to disqualify opposing counsel by listing counsel as a fact witness at trial).
For these reasons, it is difficult to set forth black letter principles in this area. The authorities on point are at times difficult to reconcile, and are in any event quite fact-specific.
Nevertheless, while the law is still developing in this area, the authorities do provide some general ethical guidance. The Committee, like the Colorado Supreme Court, see, Osborn v. District Court, 619 P.2d 41, 46 (Colo. 1980), is "aware of the current trends regarding the erection of a so-called 'Confidentiality Wall' . . . ." By its analysis of various informal requests for ethical guidance, the Committee is also aware of a number of areas in which some members of the bar fail to appreciate the limited circumstances in which a Confidentiality Wall is appropriate. Accordingly, the Committee believes that it is in a position to provide some useful information to the bar by analyzing these authorities and describing where Confidentiality Walls have been permitted, where they have been found ineffective, and what factors to consider (where a Confidentiality Wall is otherwise proper) in constructing one effectively.
Summary of Opinion
The following discussion may be summarized as follows:
Confidentiality Walls have been permitted in limited circumstances only, as a way of minimizing the risk of inadvertent disclosure of a client's confidences and secrets. The main situation in which a Confidentiality Wall may serve to avoid the otherwise strict rule of imputed disqualification is where an attorney moves from one employer (which represents a certain client) to another employer (representing a different client who might be deemed to have a competing or adverse interest to the client of the first employer). Under proper circumstances set forth below, a Confidentiality Wall may enable the new employer to undertake or continue an engagement which the attorney would not be able to handle on his or her own.
Confidentiality Walls are not permitted as a way of avoiding an attorney's or law firm's duty of undivided loyalty to a client. Accordingly, subject to 1(b) below, a Confidentiality Wall may not be constructed within a single law firm - no matter how large and diffuse that firm may be - so as to permit that firm simultaneously to represent clients whose interests are adverse in the same or a substantially related matter.
Under those limited circumstances where Confidentiality Walls are permitted, the Wall must be erected in a way which promptly and meaningfully screens the attorney from any contact with the matter at issue.
Analysis
The Colorado Appellate Courts have suggested that a Confidentiality Wall may serve to avoid the imputed disqualification of a public law firm such as a district attorney's or public defender's office. See, McCall v. District Court, 783 P.2d 1223 at 1228, n. 6 ("It may be possible for the state public defender to minimize disqualification" by creating a Confidentiality Wall which will prevent one employee's access to information as to the actions of certain co-employees); Ranum v. Colorado Real Estate Commission, 713 P.2d 418, 420 (Colo. App. 1985) (approving a Confidentiality Wall within the Attorney General's office, separating attorneys who serve as counsel to various regulatory commissions and attorneys who prosecute charges before hearing officers of those commissions). These cases reflect the Colorado courts' willingness (similar in nature to many other courts and ethics authorities which have addressed the issue) to apply the rule of imputed disqualification in a pragmatic (sometimes referred to as a "functional"), rather than a literal, manner. See, e.g., Manning, 849 F.2d at 225 (recognizing, in the context of an imputed disqualification motion under the CPR, the "new realities" of modern law practice, including "law firms employing hundreds of lawyers engaging in a plethora of specialities," "law film mergers," and the frequent movement of attorneys from firm to firm); Nemours Foundation, 632 F.Supp. at 425 (recognizing the "philosophy of pragmatism" in the MRPC regarding imputed disqualification, "which balances the expectations of confidentiality of a former client against the importance of allowing a client the representation of his choice and promoting the mobility of attorneys, particularly associates, from one private law firm to another").
While McCall and Ranum were limited to lawyers in the public sector, the McCall Court relied on authorities which, in turn, would permit the erection of a Confidentiality Wall under certain circumstances in private law firm settings.(5) Authorities from other states, interpreting the CPR, have extended to private law firms the opportunity under appropriate circumstances to avoid imputed disqualification in certain cases by erecting Confidentiality Walls.(6) The Committee concludes that for at least as long as the CPR remains in force, a similar rule should apply in Colorado.(7)
1. The interests that may justify imputed disqualification in a Confidentiality Wall context.
In order to evaluate whether a Confidentiality Wall may be effective in avoiding imputed disqualification, it is useful at the outset to identify the concerns that might justify such disqualification in the first place.
Three principal concerns basic to the existence of the attorney-client relationship and the accepted role of lawyers in American society may be implicated by allowing a law firm to represent a given client where one lawyer in that firm is unable to do so:
(a) A lawyer's duty to preserve a client's confidences.
The first concern is confidentiality. Canon 4 of the CPR states: "A lawyer should preserve the confidences and secrets of a client."
To the same effect, Model Rule 1.6(a) provides: "A lawyer shall not reveal information relating to representation of a client. . . ." and Model Rule 1.8(b) provides: "A lawyer shall not use information relating to representation of a client to the disadvantage of the client. . . ."
Confidentiality is a basic tenet of the attorney-client relationship. Unless a client has reasonable assurance that his or her lawyer will not reveal the client's confidences, the client may be unwilling to disclose them to the attorney. This could well affect the attorney's ability to provide proper legal representation.
Confidentiality Walls have succeeded where they have served to minimize the risk of inadvertent disclosure of certain protected information within a public or private law firm.(8) E.g., Grand Jury Subpoena of Ford v. United States, 756 F.2d 249, 254 (2d Cir. 1985) (Confidentiality Wall approved within a U.S. Attorney's office, such that one prosecutor may conduct a grand jury investigation of a target defendant while another, properly screened, prosecutor may question the target defendant's husband about his wife's alleged co-conspirators); Ranum, 713 P.2d at 420 (discussed in a parenthetical above); Jenson v. Touche Ross & Co., 335 N.W.2d 720, 731-732 (Minn. 1983) (court approves Confidentiality Wall in private law firm representing a defendant, where attorney who joined that firm had previously worked for another private law firm which had represented plaintiff in "at least arguably" a substantially related matter). Under proper circumstances discussed below, a Confidentiality Wall can thus serve to rebut the presumption that a lawyer has shared client confidences with his or her professional colleagues. E.g., Manning, 849 F.2d at 225-226; INA Underwriters Insurance Co. v. Rubin, 635 F.Supp. at 4-5.(9) In that way, a law firm may continue to represent a client in a given matter, even though (a) one lawyer in the firm is unable to work on it and (b) a client of another firm may be objecting to the arrangement. Id.(10)
(b) A lawyer's duty of undivided loyalty to a client.
The second concern is loyalty. The nature of the attorney-client relationship is such that the lawyer must remain loyal to the client. This interest is the subject of Canon 5 of the CPR, which provides: "A lawyer should exercise independent professional judgment on behalf of a client."
Rule 1.7(b) of the MRPC similarly provides: "A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests. . . ."
In order for the legal system to operate properly, a client must have confidence that his or her lawyer is acting solely in the client's interests.
Private law firms have attempted to create a Confidentiality Wall between two sets of attorneys who simultaneously represented competing client interests in the same or a substantially related matter. Such efforts have uniformly failed. Thus, in Fund of Funds, Ltd. v. Arthur Andersen & Co., 567 F.2d 225 (2d Cir. 1977), a law firm which was regional counsel to a national accounting firm was engaged to represent a client whose interests conflicted with the accounting firm's. Under these circumstances, the law firm was not permitted to create a Confidentiality Wall between the attorneys who regularly represented the accounting firm and those attorneys who were simultaneously engaged to represent the adverse client in the same or a substantially related matter. Id., at 229, n. 10 ("No such 'Confidentiality Wall' could be created in a single firm."). The reason for this is simple: A lawyer simply cannot, and cannot be expected to, give undivided loyalty to a client if his or her professional colleagues are simultaneously representing (and presumably giving their undivided loyalty to) another client with adverse interests in the same or a substantially related matter.(11) See also, Analytica, Inc. v. NPD Research, Inc., 708 F.2d 1263, 1267-1268 (7th Cir. 1983) (Confidentiality Wall does not permit a law firm, having been engaged by defendant in a matter, to later represent plaintiff in a substantially related matter); Westinghouse Electric Corp. v. Kerr-McGee Corp., 580 F.2d 1311, 1320-1321 (7th Cir.), cert. denied, 439 U.S. 955 (1978) (law firm operating out of two cities cannot permit its attorneys in the two separate offices to simultaneously represent adverse interests in a substantially related matter by creating a Confidentiality Wall between the two offices); Cinema 5, Ltd. v. Cinerama, Inc., 528 F.2d 1384, 1386-1387 (2d Cir. 1976) (where attorney is simultaneously a partner in two separate firms, located in two different cities, one firm cannot represent plaintiff in a lawsuit if the other firm is representing the defendant in a different, but "somewhat similar," matter).(12)
A public law firm is generally prohibited from simultaneously representing conflicting interests in the same or a substantially related matter. While this may be less of a practical problem within a prosecutor's office [whose "attorneys (generally) represent only one 'client,'" Grand Jury Subpoena of Ford, 756 F.2d at 254] than in a public defender's office [which may be called upon, consistent with its Sixth Amendment duties, occasionally to assume conflicting litigation positions (see, Osborn, 619 P.2d at 41, involving one public defender's challenge to the efficacy of the representation provided by another public defender)], all public law firms are still generally subject to this ethical proscription. However, in Ranum, 713 P.2d at 420, the Colorado Court of Appeals permitted one set of attorneys within the Attorney General's office to represent an administrative agency while another set of attorneys in that office prosecuted charges before that agency, so long as an effective Confidentiality Wall was in place.
(c) Avoiding the appearance of impropriety.
The third interest is set forth in Canon 9 of the CPR, which states: "A lawyer should avoid even the appearance of professional impropriety."
Some courts have expressed in dicta the position that disqualification may occur in a Confidentiality Wall context solely because of a violation of Canon 9. E.g., Sierra Vista Hospital, Inc. v. United States, 639 F.2d 749, 754 (Ct. Cl. 1981); INA Underwriters Insurance Co., 635 F.Supp. at 5. Other courts have based their ruling that a firm must be disqualified (notwithstanding its timely erection of a Confidentiality Wall) on Canon 9. E.g., Cinema 5, 528 F.2d at 1386-1387; Petroleum Wholesale, Inc. v. Marshall, 751 S.W.2d 295 (Tex. Civ. App. 1988). However, in every such case where disqualification has been ordered in ostensible reliance on Canon 9, there has also been a violation shown of other Canons. The Committee knows of no occasion in a Confidentiality Wall context where a lawyer was disciplined or a firm was disqualified solely because of a subjective failure to avoid the "appearance of professional impropriety" but where the attorney or firm complied with every other Disciplinary Rule. Cf. Food Brokers, Inc. v. Great Western Sugar Co., 680 P.2d 857, 859 (Colo. App. 1984) (disqualification of private attorneys under Canon 9 requires some other "specific identifiable impropriety" such as a violation of Canon 4). Indeed, the difficulty in applying the subjective dictates of Canon 9's "appearance of impropriety" standard has led to its omission from the MRPC.
Accordingly, in analyzing the issue of Confidentiality Walls in the context of the CPR, the Committee does not believe that Canon 9, by itself, is an adequate reason to erect a Confidentiality Wall or to seek disqualification of opposing counsel for failing to erect one; and the absence of any "appearance of impropriety" standard in the MRPC obviates any need to analyze Confidentiality Walls in that context.
2. The framework for analyzing when Confidentiality Walls are permitted as a way of avoiding a law firm's imputed disqualification.
In Section 1, the Committee explained, in general terms, that a Confidentiality Wall will enable a law firm to avoid imputed disqualification only in the context of preventing the inadvertent disclosure of confidential information. The Committee now addresses a series of more specific fact patterns. In this way, we hope to provide further guidance as to when a Confidentiality Wall is likely to succeed or fail. For, as the authorities show, the mere establishment of a Confidentiality Wall will not, per se, cause a court or disciplinary authority to conclude that there is no risk of an inadvertent disclosure of client confidences.
As discussed above, in determining whether a Confidentiality Wall can be erected, a firm (and a court in the context of a motion to disqualify) is called upon to balance certain conflicting interests, including the client's right to counsel of his or her choice, the lawyer's duty to preserve a client's confidences and to remain loyal to the client, the risk of inadvertent disclosure of client confidences, and a lawyer's ability to move from job to job.(13) Depending on the facts of a given case, one of these factors may assume heightened importance.
For purposes of the following discussion, we shall assume that an attorney ("Attorney") leaves one employer ("First Firm"), which represented one client ("First Firm's Client") in a certain lawsuit ("Lawsuit l"),(14) to join another employer ("Second Firm") which represents another client ("Second Firm's Client"), whose litigation interests in Lawsuit 1 or a different lawsuit ("Lawsuit 2"), are somehow adverse to those of the First Firm's Client.(15) We assume further that the First Firm's Client does not give his or her consent to the Attorney's new position at the Second Firm. See, nn. 10-11, supra.
Under these circumstances, the Second Firm is obligated at the outset to determine whether it can continue to serve as the Second Firm's Client's attorney in light of the authorities discussed in this Opinion. If the Second Firm believes that it can so remain as counsel, it risks a motion to disqualify being filed out of concern that it has not taken adequate steps to prevent an inadvertent disclosure of the First Firm's Client's confidences.
With the foregoing fact pattern in mind, where there is no relationship whatsoever between the circumstances of Lawsuit 1 and Lawsuit 2 and where the Second Firm is not involved in Lawsuit 1, there is no need for the Second Firm to erect a Confidentiality Wall. See, Smith v. Whatcott, 757 F.2d at 1100; INA Underwriters Insurance Co. v. Nalibotsky, 594 F.Supp. 1199, 1210-1211 n. 8 (E.D. Pa. 1984). If Lawsuit 1 is not related to Lawsuit 2, there is little reason to believe that the Attorney has received any secrets or confidences of the First Firm's Client which might unduly advantage the Second Firm's representation of the Second Firm's Client. See also, Osborn, 619 P.2d at 48.
However, it may be difficult to show that there is no relationship whatsoever between those engagements. As an example, even if the facts and issues don't overlap from one case to another, it may well be that a litigant's overall litigation strategy (either one of extreme aggressiveness or one evincing a willingness to settle on the eve of trial) may itself be deemed a "confidence" in need of protection. See, e.g., Novo Terapeutisk Laboratorium A/S v. Baxter Travenol Laboratories, Inc., 607 F.2d 186, 188-189 (7th Cir. 1979) (rejecting a "mathematical evaluation" as the test of a substantial relationship and concluding that that test "involves a realistic appraisal of the possibility that confidences had been disclosed in the one matter which may be harmful to the client in the other."); Chugach Electric Association v. District Court, 370 F.2d 441, 443 (9th Cir. 1966), cert. denied, 389 U.S. 820 (1967) (disqualification ordered where plaintiff's counsel, who had served as defendant's in-house counsel, "was in a position to acquire knowledge casting light on the purposes of later acts and agreements" undertaken after the attorney left defendant's employ). The Committee urges the bar to err on the side of cautiousness in erecting Confidentiality Walls where there is even the slightest reason to believe that a relationship exists between the two Lawsuits.
Where there is any relationship between the two Lawsuits, a Confidentiality Wall should be constructed around an attorney who did not work on the First Firm's Client's legal matters. See, Chambers v. Superior Court, 121 Cal.App.3d 893, 175 Cal Rptr. 575, 580 (1981) (no showing that high-ranking government attorney acquired confidential information about the matters in dispute; hence, properly constructed Confidentiality Wall will avoid the Second Firm's disqualification); Ross v. Canino, 93 N.J. 402, 461 A.2d 585, 589 (1983) (same); Jenson, 335 N.W.2d at 732 (same, but in the context where the First Firm was a private law firm). Where the Attorney did not work on the First Firm's Client's legal matters, there is little risk of prejudice to the First Firm's Client arising from any inadvertent disclosure of that Client's confidences. In those circumstances, the courts generally will defer to considerations of the Attorney's rights of job mobility and the Second Firm's Client's right to select counsel of his or her choice, and permit the Second Firm to remain as counsel upon its proper construction of a Confidentiality Wall.
However, a different situation exists where the Attorney, while at the First Firm, performed legal services for the First Firm's Client. Such a situation poses a great risk of harm to the First Firm's Client from an inadvertent disclosure of that Client's confidences. The risk is indeed great enough that, in many instances, the Second Firm cannot remain as counsel of record even if it timely constructs a Confidentiality Wall.
For instance, if in the course of Lawsuit 1, the Attorney leaves the First Firm (which represents one litigant) to join the Second Firm (which represents the adverse litigant), the key question in determining whether a Confidentiality Wall will succeed in avoiding the Second Firm's imputed disqualification is whether the Attorney was privy to the First Firm's Client's confidences. Under circumstances where the Attorney actually worked on the matter in dispute (and was thus presumed to have received client confidences bearing on the matter, see, note 9, supra), courts have regularly found that even a properly constructed Confidentiality Wall at the Second Firm will not avoid the risk of improper disclosure of the First Firm's Client's confidences and, thus, have disqualified the Second Firm. E.g., Cheng v. GAF Corp., 631 F.2d 1052 at 1058; United States v. Uzzi, 549 F.Supp. 979, 983-984 (S.D.N.Y. 1982); State of Nebraska ex rel. Freezer Services, Inc. v. Mullen, 235 Neb. 981, 458 N.W.2d 245, 253 (1990); Petroleum Wholesale, 751 S.W.2d at 300; Edward J. DeBartolo Corp., 516 So.2d at 7; see also, Manning, 849 F.2d at 227 (appellate court remands the matter to trial court to see if the Attorney actually worked for the opposing party in the same case; if so, the Second Firm would be disqualified despite properly constructing a Confidentiality Wall).
Let us say, instead, that the Attorney leaves the First Firm after Lawsuit 1 has concluded, but during the pendency of a second lawsuit, Lawsuit 2, involving the First Firm's Client. The risk of prejudice to the First Firm's Client from any inadvertent disclosure of that Client's confidences may or may not be great, depending on the relationship between the two Lawsuits.
As the relationship between the two Lawsuits becomes increasingly "substantial," the risk increases (if the Attorney was privy to the First Firm's Client's confidences, see, note 9, supra) that the First Firm's Client will be prejudiced by any inadvertent disclosure of that Client's confidences; and the less likely it is that even a properly constructed Confidentiality Wall would suffice under those circumstances. See, e.g., Haagen-Dazs Co., Inc. v. Perche No! Gelato, Inc., 639 F.Supp. 282 at 287 (disqualification where "substantial relationship" found between two lawsuits). Where there is a "substantial relationship" between the two Lawsuits,(16) then - as with the above example of the Attorney moving from the First Firm to the Second Firm during the pendency of Lawsuit l - the risk is great that the First Firm's Client's confidences inadvertently may be disclosed. Certainly if the Second Firm fails to establish a Confidentiality Wall, it should be disqualified from any further involvement in Lawsuit 2 under circumstances where Lawsuit 1 and Lawsuit 2 are substantially related. E.g., Smith v. Whatcott, 757 F.2d at 1101; EZ Paintr Corp. v. Padco, Inc., 746 F.2d 1459, 1462 (Fed. Cir. 1984).
What is or is not a "substantial relationship" may, of course, be a difficult question in any given instance. In some cases, particularly where the Attorney and the First Firm performed extensive services for the First Firm's Client over a sustained period of time, the term "substantial relationship" may require a far more searching analysis than where the Attorney and the First Firm represented the First Firm's Client only briefly, in an isolated matter. See, note 16, supra.
3. Factors to consider in constructing a Confidentiality Wall.
We have discussed a series of circumstances under which a Confidentiality Wall may be constructed. But even in those circumstances, the Second Firm may remain as counsel of record only if it establishes a Confidentiality Wall in the proper way. E.g., Atasi Corp. v. Seagate Technology, 847 F.2d 826, 831 (Fed. Cir. 1988) (disqualifying the Second Firm where that Firm undertook to create a Confidentiality Wall, but failed to do so effectively).
The Committee is in no position to investigate or comment upon the effectiveness of any given Confidentiality Wall; nor is this Opinion intended to identify the sole factors to consider in constructing one. However, the authorities set forth certain general characteristics of a properly constructed Confidentiality Wall, which any given law firm should consider in the course of determining whether and how it might construct one effectively.
The first factor is timeliness. A firm's best chance of erecting an effective Confidentiality Wall depends in great part on the speed with which the Wall is established. Before the Attorney is hired by the Second Firm, the Attorney and the Second Firm should identify all instances as to which the Attorney's work at the First Firm might give rise to the need for a Confidentiality Wall at the Second Firm. The Second Firm should critically assess whether it may continue to serve as counsel of record in Lawsuit 1 or Lawsuit 2, even upon erecting a Confidentiality Wall around the Attorney. Then, if the Second Firm concludes that it can continue to serve as counsel of record in Lawsuit 1 or Lawsuit 2 by erecting a Confidentiality Wall, the Second Firm should construct the Wall in advance of the Attorney's arrival. In this regard, see, Papanicolaou v. Chase Manhattan Bank, N.A., 720 F.Supp. 1080 at 1087 (Confidentiality Wall ineffective when created in response to a motion for disqualification); Haagen-Dazs, 639 F.Supp. at 287 (disqualification ordered where undue delay in creating Confidentiality Wall).
Second, the Attorney must be excluded from all relevant files, participation in the representation at issue, and discussion with any employee in the office about the matter being screened. The files of the matter in question should be moved from any central filing area to a separate room which the Attorney should be instructed not to enter. Where the Second Firm has a firm-wide computer network, any data on the network should be protected in some manner from the Attorney's inadvertent access. Telephone messages, intraoffice memoranda, and any documents regarding the matter that are not of record should be kept from the Attorney. In this regard, see, Nemours Foundation, 632 F.Supp. at 429; City of Hoquiam v. Public Employment Relations Committee, 29 Wash.App. 319, 628 P.2d 1314, 1322-1323 (1986), rev'd on other grounds, 97 Wash.2d 481, 646 P.2d 129 (1982); Petroleum Wholesale, 751 S.W.2d at 297.
Third, all employees of the Second Firm should be warned not to discuss any facet of the subject engagement with the Attorney, or even to discuss the matter in his or her presence. Thus, in Atasi, 847 F.2d at 831, the court rejected a Confidentiality Wall and disqualified the Second Firm where only the Attorney, and not the remainder of the Firm, was made aware of its establishment. See also, City of Hoquiam, 628 P.2d at 1322-1323.
Fourth, the firm should segregate any fees earned from the matter in question, so that the Attorney does not reap any direct financial benefit from it. See, Kovacevic v. Fair Automotive Repair, 641 F.Supp. 237, 244 (N.D. Ill. 1986); Model Rule 1.11(a)(1). This may not be possible in the case of an associate who receives a fixed salary, see, Armstrong v. McAlpin, 606 F.2d 28, 34 (2d Cir. 1979), rev'd en banc, 625 F.2d 433 (2d Cir. 1980), vacated on procedural grounds, 449 U.S. 1106 (1981) (describing in dictum the practical difficulties of avoiding a sharing of fees in this context), but is feasible in the case of partners.
Finally, courts have examined the size of the firm in determining whether a Confidentiality Wall can be effective. Compare, Cheng, 631 F.2d at 1058 (35-attorney firm is a "relatively small firm" by New York standards, such that "it is unclear . . . how disclosures, admittedly inadvertent, can be prevented throughout the course of this representation.") with Higdon v. Superior Court, 227 Cal.App.3d 167, 278 Cal.Rptr. 588, 595 (1991) (mere fact that firm was composed of only two attorneys would not, by itself, invalidate an otherwise effective Confidentiality Wall). In deciding whether a Confidentiality Wall can be effective, the Second Firm must give careful consideration to its own physical configuration.
Conclusion
The effective use of Confidentiality Walls in proper circumstances can facilitate the movement of attorneys and non-lawyers from employer to employer, while minimizing the risk of inadvertent disclosure of any client confidences learned at the previous job. However, the circumstances where Confidentiality Walls will be permitted are limited, and a Confidentiality Wall, to be effective, must be established timely and must meaningfully prevent the risk of such inadvertent disclosure.
1. The Colorado Supreme Court has adopted the Colorado Rules of Professional Conduct effective January 1, 1993.
2. The Committee, in its Formal Opinion No. 75 (adopted June 20, 1987) [16 The Colorado Lawyer 1429 (Aug. 1987)], noted that it is impossible to reconcile a strict reading of the imputed disqualification rule not only with the Committee's own conclusions about ethical conduct but also with similar conclusions reached by courts and disciplinary authorities.
3. For a further description of Confidentiality Walls and some of the circumstances in which they have been utilized, see, e.g., McCall v. District Court, 783 P.2d 1223, 1228 n. 6 (Colo. 1989); Mullins & Hutchins, "The 'Chinese Wall' in Colorado," 19 The Colorado Lawyer 429 (March 1990); Note, "The Chinese Wall Defense to Law-Firm Disqualification," 128 U. Pa. L.Rev. 677 (1980); Merrick, "Government Service and the Chinese Wall: An Accommodation Founded on Practicality," 52 U. Colo. L.Rev. 499 (1981); Wine-Banks, "Ethics of Switching Sides--II," 16 Loyola U. Chi. L.J. 516 (1985).
4. It is not so much the Committee's purpose to provide the bar with a road map to avoid disqualification as it is to provide ethical guidance. The Committee cautions that a lawyer and law firm will not be deemed to have acted ethically merely by winning a contested motion to disqualify. In this regard, see, Roth v. Roth, 84 Ill. App.3d 240, 405 N.E.2d 851, 854 (1980) (court refuses to disqualify firm where no prejudice to moving party is shown, but proceeds to "note[] that we do not pass upon the question whether disciplinary action would be appropriate."); Armstrong v. McAlpin, 625 F.2d 433, 444, 446 (2d Cir. 1980) (en banc), vacated on procedural grounds, 449 U.S. 1106 (1981) ("The current uncertainty over what is 'ethical' underscores . . . the wisdom . . . of adopting a restrained approach that focuses primarily on preserving the integrity of the trial process . . . [and leaves ethical disputes to be] addressed by the 'comprehensive disciplinary machinery' of the state and federal bar.").
5. See, Weglarz v. Bruck, 128 Ill. App.3d 1, 470 N.E.2d 21(1984), cited in, McCall, supra, note 3 at 1228 n. 6, in which the court's discussion of Confidentiality Walls involved solely the behavior of private practitioners. While the Weglarz court rejected the Confidentiality Wall under the facts there at issue, the court upheld in dictum the use of Confidentiality Walls "where the attorney can clearly and effectively show that he had no knowledge of the confidences and secrets of the client." Weglarz at 24. See also, Note, "The Chinese Wall Defense to Law-Firm Disqualification," 128 U. Pa. L.Rev. 677 (1980), also cited in that same footnote in McCall, which, in turn, cited other cases in which private firms avoided disqualification due to their timely erection of Confidentiality Walls.
6. These rules likewise apply to in-house corporate legal staffs. E.g., Miller and Warren, "Conflicts of Interest and Ethical Issues for the Inside and Outside Counsel," 40 Bus.Law. 631, 638-640, 644-646 (1985); Haagen-Dazs Co., Inc. v. Perche No! Gelato, Inc., 639 F.Supp. 282, 286-287 (N.D. Cal. 1986) (lawyer's knowledge gained while serving as in-house counsel to a corporate litigant requires disqualification of firm representing the corporation's adversary, notwithstanding firm's erection of a Confidentiality Wall, where the attorney left the corporation for that firm).
7. The authorities differ under the MRPC as to when a Confidentiality Wall would be proper in a private law firm setting. While a consensus exists that private firms can avoid imputed disqualification by erecting a Confidentiality Wall around an attorney who has left the public sector for that firm, see, Model Rule 1.11(a), some courts, in interpreting the MRPC, have rejected the effectiveness of a Confidentiality Wall where an attorney moves from one private law firm to another. E.g., Parker v. Volkswagenwerk Aktiengesellschaft, 781 P.2d 1099 at 1106 (1989); Edward J. DeBartolo Corp. v. Petrin, 516 So.2d 6, 8 (Fla. App. 1987); Roberts v. Hutchins, 572 So.2d 1231, 1234 n. 3 (Ala. 1990). These courts have based their rulings on the fact that Model Rule 1.11 expressly authorizes the use of a Confidentiality Wall where an attorney moves from public to private employment, whereas no similar enabling language appears elsewhere in the Model Rules addressing an attorney's movement from one private firm to another. This reasoning has been sharply criticized by commentators, e.g., Goldberg, "The Former Client's Disqualification Gambit: A Bad Move in Pursuit of an Ethical Anomaly," 72 U. Minn. L.Rev. 227, 278-281 (1987), and has been flatly rejected by other courts interpreting the MRPC. See, e.g., Nemours Foundation v. Gilbane, Aetna, Fed. Ins., 632 F.Supp. 418 at 428 (D.Del. 1986) ("Once it is admitted that a Chinese Wall can rebut the presumption of imputed knowledge in former government attorney cases, it becomes difficult to insist that the presumption is irrebuttable when the disqualified attorney's previous employment was private and not public. To hold fast to such a proposition would logically require a belief that privately employed attorneys are inherently incapable of being effectively screened, as though they were less trustworthy or more voluble than their ex-Government counterparts. If former government attorneys can be screened effectively, it follows that former private attorneys can too. . . ." [quoting from INA Underwriters Insurance Co. v. Rubin, 635 F.Supp. 1, 5 (E.D. Pa. 1983), which in turn quoted from Note, "The Chinese Wall Defense to Law Firm Disqualification," 128 U. Pa. L.Rev. 677, 701(1980)]). Even the Comments to the MRPC seem to conflict on the point, for on the one hand they criticize "the concept of imputation [of disqualification] with unqualified rigor," see, Comment to Model Rule 1.9 - which would appear to permit at least the same type of Confidentiality Wall rules that exist under the CPR where an attorney leaves one private firm for another - while on the other hand those same Comments call for "different provisions . . . for the movement of a lawyer from one private firm to another and for movement of a lawyer between a private firm and the government. See, Comment to Model Rule 1.10. The Committee does not believe there should be different Confidentiality Wall rules for similarly situated public and private sector attorneys; yet the Committee is currently in no position to predict how the MRPC will be applied on this point in Colorado, in the event the MRPC is adopted here.
8. Obviously, a Confidentiality Wall, no matter how elaborate, cannot prevent an intentional disclosure of client confidences. See, Goldberg, "The Former Client's Disqualification Gambit: A Bad Move in Pursuit of an Ethical Anomaly," 72 U. Minn. L.Rev. 227, 279-281 (1987). But general ethical principles are not established with the kind of paranoia that would require protection against such intentional wrongdoing. The Committee assumes that attorneys will try to act honorably. Ample sanctions already exist to deal with any attorney who might intentionally seek to disclose a client's confidences in violation of the CPR and MRPC.
9. Some courts, in Confidentiality Wall contexts, have distinguished (the Committee believes effectively) two different presumptions regarding client confidences. E.g., Jenson and INA, cited in the text above; see also, Smith v. Whatcott, 757 F.2d 1098, 1100 (10th Cir. 1985); Cheng v. GAF Corp., 631 F.2d 1052, 1056 (2d Cir. 1980), vacated on procedural grounds, 450 U.S. 903 (1981). The first presumption is that where an attorney performs legal services directly for a client, the attorney is presumed to have received confidential information from the client relating to the subject of the representation. Under this line of authority, this first presumption is irrebuttable, in order to avoid disputes (which might themselves undermine the client's rights of confidentiality) as to what the client did and didn't disclose to the attorney. Cf. Osborn v. District Court, 619 P.2d 41 (Colo. 1980) at 48 (recognizing the presumption that the client reposed confidences in the attorney, although not in a Confidentiality Wall setting). The second presumption is that an attorney who has obtained client confidences has shared them with all of his or her professional colleagues within the law firm. It is this second presumption which has been held, under proper circumstances, to be rebuttable through the establishment of an effective Confidentiality Wall. An exception to the irrebuttable nature of the first presumption may exist in the case of junior associates or law clerks, who may be able to show that their involvement in a given matter was so limited that they learned no client confidences whatsoever. E.g., Silver Chrysler Plymouth, Inc. v. Chrysler Motors Corp., 518 F.2d 751, 753-754, 756 (2d Cir. 1975) (cited approvingly in Osborn); New Jersey Ethics Opinion 633 (issued November 2, 1989).
10. Inasmuch as a client can consent to any disclosure of confidential information, see, DR 4-101(C)(1); Model Rule 1.6(a), the issuance of such consent could obviate the need for a Confidentiality Wall. A client should also have the prerogative to withhold such consent unless an effective Confidentiality Wall is established. A law firm may conclude that it is prudent under the circumstances to promptly disclose, to the attorney's former employer, the reasons for erecting a Confidentiality Wall and the extent of the Wall so erected. In this way, counsel might work together to avoid any risk of inadvertent disclosure of a client's confidences and to maintain public confidence in the legal system. (Such disclosure is indeed required under certain circumstances. See, MRPC 1.11(a).) The Committee encourages all counsel to avoid controversy where possible as to whether a client's confidences are truly at risk of being inadvertently disclosed, where a firm creates an effective Confidentiality Wall around the affected attorney. It is improper for a lawyer to counsel a client to withhold such consent merely to secure some tactical advantage. E.g., DR 7-102(A)(1); Model Rule 3.1; Comments to Model Rule 3.4 (recognizing the need for "fair competition in the adversary system"); Manning v. Waring, Cox, James, Sklar and Allen, 849 F.2d 222 (6th Cir. 1988) at 224; the Committee's Formal Opinion No. 78 (adopted June 18, 1988).
11. Of course, a client may consent, after full disclosure, to some arrangements in which the attorney's independent professional judgment is at risk of being impaired. See, DR 5-101(A); DR 5-105(C); Model Rule 1.7; see also, note 10 supra.
12. Confidentiality Walls have also been deemed ineffective in permitting a law firm to remain as counsel of record in a given lawsuit, where an attorney in that firm violated rules of professional conduct in a way which was deemed to have an impact in the overall conduct of that case. Thus, in Papanicolaou v. Chase Manhattan Bank, N.A., 720 F.Supp. 1080, 1087 (S.D.N.Y. 1989), where an attorney for defendant spoke directly with plaintiff (in violation of DR 7-104 and Model Rule 4.2) and proceeded to disparage plaintiff's attorney, the wrongdoing attorney's law firm was not permitted to remain as defendant's counsel even after creating a Confidentiality Wall around the wrongdoer.
13. At the same time, a firm should attempt to avoid imposing a "substantial hardship" on the client from having to engage new counsel. Cf. DR 5-101(B)(4); Model Rule 3.7(a)(3) (regarding disqualification in the context of an attorney serving as a witness). This factor is one which courts have used only sparingly in denying disqualification motions in a Confidentiality Wall context, and is one which law firms should not rely on as a sole basis for remaining as a litigant's counsel of record. An example of how this factor is generally applied is in Jenson v. Touche Ross & Co., 355 N.W.2d 720 (Minn. 1983) at 732. There, the court, in permitting a law firm to remain involved as counsel of record, considered the fact that the lawsuit was years old when the attorney left one firm (representing one litigant) for another (representing the opposing litigant). But the court appears to have given at least as much (if not greater) weight to the facts that the attorney's contacts with the lawsuit were minimal and that the client of the first firm could not demonstrate any true harm arising from the attorney's job switch, so long as an effective Confidentiality Wall was in place at the second firm. See also, Cheng v. GAF Corp., 631 F.2d 1052 (2d Cir. 1980) at 1057-1058, where a law firm was disqualified (despite its erection of a Confidentiality Wall) from a lawsuit which was pending for over two years by the time the firm hired an attorney who had previously worked for the law firm representing the adverse party. The Committee cautions that before any firm proceeds to hire an attorney under these circumstances, the firm give serious consideration to the risk of its own disqualification and the consequential harm which may befall its own client.
14. The Committee has selected a litigation context for illustrative purposes only. There is just as much need for a Confidentiality Wall in a business setting (where an attorney who has worked at a firm representing one party to a transaction joins another firm representing the other party to that transaction) or any other setting where the risk exists of an inadvertent disclosure of client confidences.
15. The need for a Confidentiality Wall applies as well in the case of non-lawyer employees who move from job to job. See, e.g., DR 4-101(D) (regarding an attorney's duty to cause his or her non-lawyer employees to preserve a client's confidences); Model Rule 5.3 (same); ABA Informal Opinion 88-1526 (regarding erection of Confidentiality Walls around non-lawyer employees); Kapco Manufacturing Co. v. C & O Enterprises, Inc., 637 F.Supp. 1231, 1238-1239 (N.D. Ill. 1985) (law firm avoids disqualification by screening office manager/secretary who was privy to confidential information while employed at another law firm). A non-lawyer may have access to such sensitive information at one job that a second employer, upon hiring the non-lawyer, may have to withdraw (or be disqualified) from representing a client with interests which conflict with those of the First Firm's Client, even if the Second Firm erects a Confidentiality Wall. Certainly, if the non-lawyer proceeds to disclose the First Firm's Client's confidences to employees at the Second Firm, that Firm should withdraw (or be disqualified) from any matter as to which the First Firm's Client may be injured from the improper disclosure. E.g., Williams v. Trans World Airlines, Inc., 588 F.Supp. 1037, 1044-1045 (W.D. Mo. 1984) (Second Firm disqualified where secretary disclosed the First Firm's Client's confidences).
16. In Osborn v. District Court, supra, note 9 at 47, n. 10, the Colorado Supreme Court defined a "substantially related" matter by referring to its holding in Roberts v. People, 11 Colo. 213, 17 P. 637 (1888), in which it used the phrase "facts of which are somewhat interwoven"; see also, Food Brokers v. Great Western Sugar Co., 680 P.2d 857 (Colo. App. 1984) at 858 ("In determining whether there is a substantial relationship, similarities between the two factual situations and the legal questions posed must be considered."). However, there is nothing in Osborn or Food Brokers to suggest that the Colorado Supreme Court has limited its definition of "substantial relationship" to these two tests; and as discussed in the text, there is reason to believe that a broader definition could be applied.
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