What can you say about your clients when negotiating a lateral move to a new firm?
Sonia is the managing partner of ABC law firm, a medium-sized Texas firm. While attending a local bar event, she chats with an attorney, Jose, who mentions confidentially that he is exploring leaving his law firm and taking his robust book of business with him. Sonia is familiar with Jose’s practice and thinks he would be a great fit at ABC, both personally and professionally. When she says that her firm may be interested in having him join the firm, Jose says that ABC is on his list of possible destinations. Sonia says that she will discuss it with her partners.
Sonia convenes a meeting with her partners to discuss hiring Jose. All agree that Jose would be an excellent addition to the firm, but some partners express concerns about potential conflicts between Jose’s clients and their own. The partners discuss how to assess potential conflicts without disclosing confidential information or violating ethics rules, but no one is exactly sure how to do that.
According to a 2011 Ethics Opinion, which of the following is required with respect to conflicts of interest when hiring a new lateral partner?
A. ABC and Jose cannot provide any conflict information until Jose is no longer employed by his firm
B. ABC and Jose can provide limited conflict information provided that all other material issues regarding Jose’s employment with ABC have been resolved first
C. ABC and Jose must resolve all conflict issues before engaging in any employment negotiations
D. ABC and Jose must have a neutral third party assess potential conflicts to determine whether any conflicts are “irresolvable” before ABC and Jose exchange any conflicts information
Rule 1.05 of the Texas Disciplinary of Professional Conduct provides that a lawyer cannot reveal any privileged or confidential information to third parties with certain specific exceptions. So how is a law firm to determine whether a new hire will bring conflicts to the firm without violating that Rule?
In Ethics Opinion 607 (2011), the Professional Ethics Committee for the State Bar of Texas set forth a procedure that permits attorneys and law firms to discuss conflicts in a limited manner to protect their clients’ interests while facilitating the ability for lawyers to make lateral moves in an orderly and ethical matter. The Opinion provides that disclosures to a prospective law firm regarding the lawyer’s prior clients and work will be necessary to comply with the ethics rules provided that the following requirements are met:
(1) The disclosure of the information is “necessary” in the sense that the provision of the information is a late step in the consideration of possible employment of the lawyer by the law firm and comes only after all other material issues regarding the law firm’s employment of the lawyer have been favorably resolved between the lawyer and the law firm.
(2) The information is provided by the lawyer to the law firm pursuant to a legally enforceable agreement, preferably in writing, that for as long as the information remains confidential the law firm will keep the information confidential within the firm and use the information solely for purposes of determining whether to hire the lawyer and for purposes of complying with the requirements of Rule 1.09 or Rule 1.10, as applicable, if the lawyer is hired.
(3) The information provided by the lawyer to the law firm is no more extensive than is necessary for the law firm to determine compliance with Rule 1.09 or Rule 1.10 as the case may be. As noted in Comment 14 to Rule 1.05, a disclosure permitted under an exception to the Rule “should be no greater than the lawyer believes necessary to the purpose.”
(4) The lawyer does not disclose any information concerning a client to the law firm that would in the reasonable judgment of the lawyer create a significant risk, taking into account the law firm’s obligation of confidentiality with respect to the information provided, of adverse effect on material interests of the client. For purposes of this requirement, the lawyer must weigh the extent of harm to the client’s interests of any disclosure by or through the law firm and the likelihood that such disclosure might occur. Examples of circumstances where the lawyer might conclude that the risk to client interests is significant include confidential information on a highly sensitive business transaction and confidential information relating to the marital or parental status of a client. If the lawyer determines that risk to the client from proposed disclosure to the law firm is significant, the information must not be provided to the law firm without client consent, and when information is withheld to protect confidential client information the lawyer must inform the law firm of that fact without revealing the confidential information itself. In such a case, the obligation to protect client confidential information set forth in Rule 1.05 will prevent the law firm’s verification of full compliance with Rule 1.09 or Rule 1.10. The result may be that the law firm’s proposed employment of the lawyer will not be possible at that time.
The correct response is B.