Recent Ohio Decision Clarifies Conflict of Interest Rule for Matters
In a decision that clarifies the confidentiality and loyalty underpinnings of the conflict of interest principles in Ohio’s version of Rule 5-105 of the Code of Professional Responsibility, the United States District Court for the Northern District of Ohio very recently ruled that a law firm would not be disqualified from defending a company in litigation when another office of the same firm represented the plaintiff in an administrative proceeding in an unrelated matter. The court reasoned that: “if the attorney can show that he can represent adverse clients concurrently with equal vigor, without conflict of loyalties and without using confidential information to the detriment of either client,” the presumption of a conflict in concurrent adverse representation is rebutted. Pioneer-Standard Electronics, Inc. v. Cap Gemini America, Inc., No. 1:01 CV 2185, at 7 (N.D. Ohio, March 11, 2002).
The factual background that gave rise to the conflict issue involved Pioneer-Standard Electronics, Inc. (“Pioneer”), a distributor of electronics and computer products, who hired Cap Gemini America, Inc. (Cap Gemini”), a consulting firm, to modify Pioneer’s software. A dispute arose regarding that engagement, and Pioneer sued Cap Gemini. Cap Gemini retained Shearman and Sterling to defendant it in the lawsuit filed by Pioneer. Shearman, however, was representing Pioneer in an unrelated regulatory matter, from a different office that was handling the litigation.
Although Shearman terminated its relationship with Pioneer after Pioneer refused to waive the conflict, the court analyzed the case as one of concurrent litigation. Pioneer moved to disqualify Shearman from the Cap Gemini lawsuit based on Rule 5-105 (B) of the Ohio Code of Professional Responsibility that prohibits an attorney from “multiple employment if the exercise of his independent professional judgment on behalf of a client is likely to be “adversely affected” by his representation of another client.”
The court found that a law firm could not convert an existing client into a former client simply by a self-serving, unilateral withdrawal, and therefore the “substantially related” test that governs former client conflicts was not applicable. Rather, the conflict among existing clients must be analyzed under the stricter test for concurrent adverse representation. The court determined that the stricter test for concurrent representation is not a per se rule against an attorney representing clients adverse to each other, but rather it creates a rebuttable presumption. Id. at 6-7.
The court made a factual finding that there was no confidential information that the Shearman firm could use from its representation of Pioneer in a separate matter, against Pioneer in the defense of Pioneer’s claim against a different Shearman client. The court also found that there was no barrier to the Shearman firm pursuing both the defense of the litigation opposing Pioneer’s claim and a separate, unrelated regulatory matter on behalf of Pioneer, simultaneously with equal vigor.
Judge Patricia Gaughan reasoned that the factually determinative factor in her analysis was that the two separate matters were being handled by separate lawyers in separate offices of the Shearman firm and that the regulatory matter and the lawsuit were wholly unrelated. The court noted that the result would have been the same under Model Rule of Professional Conduct 1.7 rather than DR 5-105 of the Model Code of Professional Responsibility. Id. at 8 n.3
Judge Gaughan was persuaded by the logic of the decision in Elonex I.P Holdings, Ltd. v. Apple Computer, Inc., 142 F. Supp.2d 579 (D. Del. 2001), which was based on Rule 1.7. In the Elonex case, the Dechert firm represented Apple in one suit and also represented Elonex in a separate suit that named Apple as a defendant. Both matters, however, were unrelated and the court found that there was no likelihood of passing confidential data between Apple and Elonex. Id. at 582. Thus, the court concluded that Dechert “could reasonably serve both clients’ interests.” Id.
This decision is an example of one possible situation where a law firm can be on the opposite side of a case taking an adverse position against one of its clients, at the same time it is advocating on behalf of that same client in an unrelated matter. Of course this analysis of the ethical rules does not address various related practical concerns of client relations , such as when a firm represents more than one client in the same industry.