The Delaware Rules of Professional Conduct (“RPC”) impute any individual lawyer’s conflict to all lawyers in a firm.  If any individual lawyer has a conflict all attorneys in that lawyer’s firm have the same conflict. Such situations can be considered from the premise that a firm of lawyers is essentially one lawyer for purposes of the rules governing loyalty to the client, or from the premise that each lawyer is vicariously bound by the obligation of loyalty owed by each lawyer with whom the lawyer is associated.

Laterals bring their conflicts with them. However, the RPC has a provision to permit attorneys to change firms without disqualifying their new firms.

Applicable RPC rules:

Rule 1.10 Imputation of Conflicts of Interest:  General Rule

• Except as otherwise provided in this rule, 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 Rules 1.7 [Conflict of Interest: Current Clients] or 1.9 [Duties to Former Clients], unless the prohibition is based on a personal interest of the prohibited lawyer and does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm
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• When a lawyer becomes associated with a firm, no lawyer associated in the firm shall knowingly represent a client in a matter in which that lawyer is disqualified under Rule 1.9 unless: (1) the personally disqualified lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom; and (2) written notice is promptly given to the affected former client.

Rule 1.0. Terminology.

(k) “Screened” denotes the isolation of a lawyer from any participation in a matter through the timely imposition of procedures within a firm that are reasonably adequate under the circumstances to protect information that the isolated lawyer is obligated to protect under these Rules or other law.

Comments to Rule 1.0

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[9] The purpose of screening is to assure the affected parties that confidential information known by the personally disqualified lawyer remains protected. The personally disqualified lawyer should acknowledge the obligation not to communicate with any of the other lawyers in the firm with respect to the matter. Similarly, other lawyers in the firm who are working on the matter should be informed that the screening is in place and that they may not communicate with the personally disqualified lawyer with respect to the matter. Additional screening measures that are appropriate for the particular matter will depend on the circumstances. To implement, reinforce and remind all affected lawyers of the presence of the screening, it may be appropriate for the firm to undertake such procedures as a written undertaking by the screened lawyer to avoid any communication with other firm personnel and any contact with any firm files or other information, including information in electronic form, relating to the matter, written notice and instructions to all other firm personnel forbidding any communication with the screened lawyer relating to the matter, denial of access by the screened lawyer to firm files or other information, including information in electronic form, relating to the matter, and periodic reminders of the screen to the screened lawyer and all other firm personnel.

[10] In order to be effective, screening measures must be implemented as soon as practical after a lawyer or law firm knows or reasonably should know that there is a need for screening.

The proper method to implement an effective screen is discussed in Maxus Liquidating Trust v. YPF S.A. (In re Maxus Energy Corp.), 2022 US. App. LEXIS 25317 (3d Cir. 2022).   In 2018, Maxus Liquidating Trust (“Trust”) sued Maxus’s parents, collectively, “YPF”, asserting fraudulent conveyance and alter ego claims.  YPF was represented by Sidley Austin. Jessica Boelter was a partner in Sidley’s restructuring group. She billed a total 300 hours to the YPF representation. She was considered by YPF executives as “an integral part” of its legal team.

White & Case represented the Trust.  When Boelter moved to White & Case, it implemented an ethical wall as a screen.  YPF thought that no screen  could be sufficient and it moved to disqualify White & Case from representing the Trust.  The district court denied the motion.

The Third Circuit affirmed, holding that the bankruptcy court reasonably concluded that White & Case and Ms. Boelter complied to the letter with the applicable ethical rule. 

What did White & Case do?

Initially, Boelter went through a standard conflict-screening process.

White & Case used both an inclusionary and an exclusionary screen. The inclusionary screen prohibited all attorneys and staff from involvement in the YPF representation if not assigned to it. Those excluded attorneys and staff could not access records or other information related to the representation. The exclusionary screen prevented Boelter, specifically, from involvement in the YPF representation in any way.

White & Case obtained Boelter’s acknowledgment that she would comply with the screen and periodically certified her compliance.

White & Case gave YPF written notice of Boelter’s employment the day she began with the firm. The letter explained the nature of White & Case’s screen and included a statement of the firm’s and of Boelter’s compliance with the Model Rules. White & Case also stated that review may be available before a tribunal.

White & Case agreed to respond promptly to any written inquiries or objections about the screening procedures. It provided additional information to YPF attorneys in their later discussions.

Boelter says she never breached the screen.

White & Case did not give any portion of its fee from the YPF adversary proceeding to Boelter.

In response to interrogatories, White & Case said that “partners at White & Case are not compensated based on specific case outcomes or earnings” so neither Boelter nor Lauria (her husband who is a White & Case partner) would receive any compensation based on the firm’s representation of the Trust.

Although the local rules do not incorporate the Model Rules’ comments, one comment persuasively says that Model Rule 1.10 “does not prohibit the screened lawyer from receiving a salary or partnership share established by prior independent agreement, but that lawyer may not receive compensation directly related to the matter in which the lawyer is disqualified.” Model Rules of Pro. Conduct r. 1.10, cmt 8.

Conclusion

A law firm can protect itself from being disqualified by a lateral if it literally complies with the RPC.  This case gives an exemplar of how to do so.