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Court clarifies attorney conflict of interest rule

Institutional knowledge about a former client, on its own, does not bar an attorney from representing an adverse party in a later action, the Washington Supreme Court held in Plein v. USAA Ins. Co., No. 97563-9 (May 21, 2020). The burden to prove the matters are substantially related falls on the former client who seeks to disqualify an adverse party’s lawyer, and a factual relationship between the two matters is necessary.

In Plein, a Seattle law firm had represented an insurance company for ten years. During this long-term relationship, eight of the firm’s attorneys had represented the insurer in 165 cases. After the insurer terminated its relationship with the law firm, two of the law firm attorneys – who had never represented the insurer – represented the Pleins in their suit against the insurer for bad-faith claim handling. The law firm had not represented the insurer in the Pleins’ claim, but it had represented the insurer in a similar type of claim. The Pleins’ attorneys had no access to confidential communications with the insurer when it had been a client.

Nonetheless, when the insurer found out that two attorneys from its former law firm represented the Pleins, it moved to disqualify the attorneys in the bad-faith case. The insurer asserted that the law firm had a conflict of interest, and that RPC 1.9 prevented it from representing the Pleins. It argued that law firm attorneys had learned significant confidential information about all aspects of the insurer’s litigation and trial strategies and approaches, as well as its business practices and philosophies. The trial court denied the motion to disqualify, finding no conflict of interest arose.

The Court of Appeals accepted review and reversed. It relied on language in RPC 1.9(a), and comment 3 to the rule, that an attorney cannot represent a new client against a former client in a “substantially related matter,” and that matters may be “substantially related” if a substantial risk exists that the lawyer obtained confidential factual information in the prior representation that would materially advance the client’s position in the later matter. As described in our Autumn 2019 issue, the Court of Appeals concluded that a conflict of interest existed because the law firm had learned extensive information about all aspects of the insurer’s strategies for bad-faith litigation, it had advised the insurer on multiple bad faith cases, it obtained the confidences over a relationship of long duration, and it had specific knowledge about how the insurer had handled a factually similar case.

The Washington Supreme Court accepted review of the Court of Appeals decision and reversed. It held the law firm did not represent the insurer in a “substantially related matter” and was not barred from representing the Pleins.

In doing so, the Court emphasized that the inquiry is whether the former and current representation are factually related. To create a conflict, the information an attorney has about a former client must be “confidential factual information.” General knowledge of an organizational client’s policies, strategies, and practices will not create a conflict. Nor is a lawyer barred from representing a current client against a former organizational client on a “factually distinct problem” of the same type as the prior representation. The key is factual information the attorney obtained in the representation of the former client, rather than knowledge about strategy and approach.

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