Chancery Rejects Motion to Disqualify Counsel Based on Alleged Conflict

 In the Matter of the Rehabilitation of Indemnity Insurance Corp., C.A. No 8601-VCL (Del. Ch. Feb. 19, 2014). Takeaway: This succinct letter ruling from the Court of Chancery provides one of many examples of why a motion to disqualify counsel based on alleged violations of the Delaware Lawyers’ Rules of Professional Conduct, such as for an alleged conflict of interest based on Rule 1.9, is often a fool’s errand–at least in state court.  Other examples abound. See, e.g., prior examples here and here.

In sum, this decision made quick work of dueling motions based on the high threshold that was not met for such motions. Namely, violation of the rules of professional conduct applicable to lawyers is usually not sufficient, ipso facto, to disqualify a lawyer from representing a party in a pending matter. The same approach does not apply in other courts in other states. The reasoning in Delaware is that the agency of the Delaware Supreme Court known as the Office of Disciplinary Counsel is the proper forum where issues of violations by lawyers of the rules of legal ethics are investigated and enforced–not in the courtroom. In addition, the Court of Chancery is often skeptical of the tactical motives for filing such motions.

Stated another way, a motion to disqualify counsel based on an alleged violation of legal ethics will not prevail in Delaware unless the following standard is satisfied:

“Absent misconduct which taints the proceedings, thereby obstructing the orderly administration of justice, there is no independent right of counsel to challenge another lawyer’s alleged breach of the Rules [of legal ethics] outside of a disciplinary proceeding.” Slip op. at 3 (citation omitted). That is, a violation of the rules of professional conduct does not suffice to disqualify an attorney. Rather, the litigant “must show that the conflict prejudiced the fairness of the proceeding, not merely a violation of the Rules had occurred.” Id. (citation omitted). Clear enough?

Bottom line: Motions to disqualify counsel from representing a client in a pending matter, based on an alleged ethical violation, usually fail in Delaware state courts.

A prior Chancery decision in this case was highlighted on these pages.