Ethics Opinion 275

Receipt of Confidential Information Bars Subsequent Representation of Another Client in the Same or a Substantially Related Matter Unless Screen Can Be Erected

* [NOTE: See how Opinion 275 has been substantively affected by the amendments to the D.C. Rules of Professional Conduct that became effective on February 1, 2007]

A law firm which is contacted by a potential class action plaintiff and which receives confidential or secret information from the potential client may not, after the law firm and the potential client fail to agree on the terms of the engagement, seek to identify another client to represent in the same or substantially related matter unless the attorneys who received the confidential information from the first potential client can be screened from the subsequent representation or the first potential client consents to the subsequent representation.

Applicable Rules

• Rule 1.6 (Confidentiality)
• Rule 1.10 (Imputed Disqualification)

Inquiry

A law firm was contacted by a potential client interested in serving as a representative of a plaintiff class in a contingent fee antitrust class action. The potential client and various firm lawyers had discussions concerning the facts on which the client’s claim might be based, and the potential client provided the firm with numerous materials relating to the client’s claim. Most of these materials were publicly available, consisting in part of litigation pleadings, public reports of governmental regulatory bodies, and newspaper articles. However, not all of the materials were publicly available; some of them consisted of the prospective client’s business records, correspondence, and handwritten notes. The client has emphatically stated in writing that he expected the inquiring firm to hold the materials he provided to the firm in confidence.

Negotiations with the potential client concerning fees were unsuccessful, and the law firm now wishes to seek a different person to represent the class on whose behalf the firm could undertake litigation in the same subject area. The law firm has asked if it may do so consistent with its obligations under the ethics rules.

Discussion

The point of departure for our analysis is Rule 1.6, which states in part:

(a) [A] lawyer shall not knowingly . . . (1) reveal a confidence or secret of the lawyer’s client; (2) use a confidence or secret of the lawyer’s client to the disadvantage of the client; (3) use a confidence or secret of the lawyer’s client for the advantage of the lawyer or of a third person.

(b) “Confidence” refers to information protected by the attorney-client privilege under applicable law, and “secret” refers to other information gained in the professional relationship that the client has requested be held inviolate, or the disclosure of which would be embarrassing, or would be likely to be detrimental, to the client.

Comment [6] to Rule 1.6 further states that the rule of attorney-client confidentiality applies not merely to matters communicated in confidence by the client, but also to all information gained in the course of the professional relationship that the client requests be held inviolate. “This ethical precept . . . exists without regard to the nature or source of the information or the fact that others share the knowledge.” Id.

The Law Firm Received Confidential Information

The inquiry in this case focuses heavily on the notion that many of the materials presented to the law firm by the first potential client are “publicly available.” Because there is no attorney-client privilege as to publicly available materials, the inquirer contends that there is no ethical proscription against the law firm’s use of those materials in connection with the second representation.

However, the confidentiality rule of ethics is broader than the attorney-client privilege. See Rule 1.6, Comments [5] and [6]. The Rule also protects “secrets,” which can include information divulged by a client to a lawyer that the client asks be kept confidential. For the reasons set forth below, we conclude that, on the particular facts of this inquiry, the confidentiality rule prevents the inquiring attorneys from seeking or accepting a second representation on behalf of the class that was identified for the law firm by the first potential client.

First, the facts of the inquiry before us argue strongly that the inquiring lawyers have bound themselves to keep the information divulged by the first potential client confidential. Unlike many other obligations of an attorney that arise only after the attorney-client relationship is fully formed, a lawyer’s confidentiality obligations begin as soon as a potential client consults with a lawyer. Rule 1.6, Comment [7]. Thus, the fact that the potential client never became an actual client of the inquiring law firm does not release the inquiring law firm from its confidentiality obligations. Second, not all of the information imparted by the first potential client was publicly available. Among the records provided to the law firm and reviewed by it were business records, handwritten notes, and correspondence, none of which were “publicly available” as that term is used in Rule 1.6.

Furthermore, the potential client, in the course of discussing the claim that he wished to assert with the assistance of the inquiring firm, divulged to the firm’s lawyers facts and circumstances that the potential client had developed through other litigation. Thus, the potential client had paid for assembling and developing material that indicated the potential of a cause of action on behalf of a class of plaintiffs. The potential client wished to become a named plaintiff on behalf of the class with the possibility of being compensated for serving as such, and he clearly stated in writing that he expected the firm to keep the materials that he submitted to it confidential. The materials are therefore “secrets” of the potential client under our Rules. It follows that the inquiring lawyers may not, after failing to reach an agreement on fees with the potential client, exploit information developed at the potential client’s expense for the advantage of the law firm or the law firm’s subsequent client.

Of course, what a lawyer learns about the law in general, about how a particular industry operates, or about how legal principles may apply to certain kinds of cases in the course of doing professional work for a client may be used by the lawyer in representing another client. See our Opinion No. 175 (1986).¹ The general principles announced there do not apply to this case because the law firm in this inquiry is not proposing to use general knowledge, but instead wishes to use a specific set of facts brought to the firm’s attention and developed in part by the potential client. The assembly and presentation of those facts is the product of the first potential client’s efforts. To allow the firm to appropriate that knowledge and exploit the specific body of information assembled by the potential client to his detriment is not the sort of generalized use that is contemplated by the principles discussed in Opinion No. 175.

Imputed Disqualification

We turn now to the question whether the whole of the inquiring law firm is disqualified because of the contact of some of the firm’s lawyers with the first potential client. Rule 1.10 addresses the imputation of a disqualification to all members of the same firm. The Rule does not explicitly refer to Rule 1.6 as one of the rules that gives rise to an imputed disqualification, but new Comments [7] through [9] make it clear that there is an interplay between Rule 1.10(a) and Rule 1.6. Those comments make explicit that the loyalty obligations of each lawyer in the firm, which are imputed under Rule 1.10(a), would be implicated when individual lawyers had acquired confidential information from a potential client but, because of Rule 1.6, could not share that information with another client as to whose matter the information is relevant. The lawyers who met with the first potential client and reviewed his materials would be disqualified from representing a second class plaintiff and, by operation of Rule 1.10, so would all of the firm’s lawyers.

As of November 1, 1996, however, the District of Columbia Court of Appeals amended Rule 1.10(a). The new proviso in Rule 1.10(a) establishes an exception to the imputation rule, which would otherwise disqualify all lawyers in the law firm from representing a client simply because a single lawyer or a specific group of lawyers in the firm acquired confidential information during an initial interview with a prospective client. Thus, even if the firm cannot share the confidential information of the potential client with an existing or future firm client, in those situations where the integrity of the confidential information can be maintained by walling off the lawyer or lawyers who interviewed the prospective client, the firm may continue to represent its existing client or may thereafter acquire other adverse clients in the same matter.

But the new proviso does not cover the present inquiry because the inquiring firm cannot now effectively wall off the lawyers who consulted with the first potential client. As we understand the facts, given the amount of time that passed between the initial interview and the end of the fee negotiations (several months), too many lawyers (virtually the whole litigation section) had been exposed to the potential client’s confidential information, and too many discussions around the firm had occurred before the firm broke off its negotiations with the potential client to make walling off a practical and effective solution. Therefore, the inquiring firm cannot avail itself of the new exception to Rule 1.10.

We believe that the law firm must honor its confidentiality obligations to the first potential client and must refrain from seeking a second client to initiate the very same litigation that was presented to it by the first client, absent an informed waiver from the first client. The same result could apply even if a second client sought out the firm without its taking any initiative. The information that the firm received from the first potential client is: (1) protected by the confidentiality rule; (2) directly relevant to the representation of the second client; but (3) may not be used by the law firm or revealed to the second client, a limitation that could conceivably violate the firm’s duties of zeal and loyalty to the second client. Furthermore, the use of the confidential information in the representation of the second client would arguably disadvantage the first potential client who wishes to be the class representative, thereby violating Rule 1.6(a)(2).

Inquiry No. 96-11-32
Adopted: November 19, 1997

1. See also Comment [10] to Rule 1.7, which points out that: “The fact that two clients are business competitors, standing 1 alone, is usually not a bar to simultaneous representation.” The same principle would apply a fortiori to sequential representations.