Was the paralegal Hargrove aware of the potential conflict of interest?

CASES FOR ANALYSIS
In this California case of first impression, a sole practitioner was disqualified from handling several asbestos cases when a paralegal who had previously worked for the defense firm involved came to work for him.
In re Complex Asbestos Litigation
232 Cal. App. 3d 572, 283 Cal. Rptr. 732 (1991)
Attorney Jeffrey B. Harrison, his law firm, and their affected clients appeal from an order disqualifying the Harrison firm in nine asbestos-related
0
personal injury actions. The appeal presents the difficult issue of whether a law firm should be disqualified because an employee of the firm possessed attorney-client confidences from previous employment by opposing counsel in pending litigation. We hold that disqualification is appropriate unless there is written consent or the law firm has effectively screened the employee from involvement with the litigation to which the information relates. . . .
Michael Vogel worked as a paralegal for the law firm of Brobeck, Phleger & Harrison (Brobeck) from October 28, 1985, to November 30, 1988. Vogel came to Brobeck with experience working for a law firm that represented defendants in asbestos litigation. Brobeck also represented asbestos litigation defendants, including respondents. At Brobeck, Vogel worked exclusively on asbestos litigation.
During most of the period Brobeck employed Vogel, he worked on settlement evaluations. . . .
Vogel also monitored trial events, received daily reports from the attorneys in trial, and relayed trial reports to the clients. . . .
In 1988, Vogel’s duties changed when he was assigned to work for a trial team. With that change, Vogel no longer was involved with the settlement evaluation meetings and reports. Instead, he helped prepare specific cases assigned to the team. Vogel did not work on any cases in which the Harrison firm represented the plaintiffs. . . .
Brobeck gave Vogel two weeks’ notice of his termination, though his termination date was later extended to the end of November.
Vogel contacted a number of firms about employment, and learned that the Harrison firm was looking for paralegals. The Harrison firm recently had opened a Northern California office and filed a number of asbestos cases against respondents. Some time in the second half of November 1988, Vogel called Harrison to ask him for a job with his firm.
In that first telephone conversation, Harrison learned that Vogel had worked for Brobeck on asbestos litigation settlements. Harrison testified that he did not then offer Vogel a job for two reasons. First, Harrison did not think he would need a new paralegal until February or March of 1989. Second, Harrison was concerned about the appearance of a conflict of interest in his firm’s hiring a paralegal from Brobeck. Harrison discussed the conflict problem with other attorneys, and told Vogel that he could be hired only if Vogel got a waiver from the senior asbestos litigation partner at Brobeck.
Vogel testified that he spoke with Stephen Snyder, the Brobeck partner in charge of managing the Northern California asbestos litigation. Vogel claimed he told Snyder of the possible job with the Harrison firm, and that Snyder later told him the clients had approved and that Snyder would provide a written waiver if Vogel wanted. In his testimony, Snyder firmly denied having any such conversations or giving Vogel any conflicts waiver to work for Harrison. The trial court resolved this credibility dispute in favor of Snyder.
p. 231
p. 232
While waiting for a job with the Harrison firm, Vogel went to work for Bjork, which represented two of the respondents in asbestos litigation in Northern California. Vogel worked for Bjork during December 1988, organizing boxes of materials transferred from Brobeck to Bjork. While there, Vogel again called Harrison to press him for a job. Vogel told Harrison that Brobeck had approved his working for Harrison, and Harrison offered Vogel a job starting after the holidays. During their conversations, Harrison told Vogel the job involved work on complex, nonasbestos civil matters, and later would involve processing release documents and checks for asbestos litigation settlements. Harrison did not contact Brobeck to confirm Vogel’s claim that he made a full disclosure and obtained Brobeck’s consent. Nor did Harrison tell Vogel that he needed a waiver from Bjork.
Vogel informed Bjork he was quitting to work for the Harrison firm. Vogel told a partner at Bjork that he wanted experience in areas other than asbestos litigation, and that he would work on securities and real estate development litigation at the Harrison firm. Initially, Vogel’s work for the Harrison firm was confined to those two areas.
However, at the end of February 1989, Vogel was asked to finish another paralegal’s job of contacting asbestos plaintiffs to complete client questionnaires. The questionnaire answers provided information for discovery requests by the defendants. Vogel contacted Bjork and others to request copies of discovery materials for the Harrison firm. Vogel also assisted when the Harrison firm’s asbestos trial teams needed extra help.
In March 1989, Snyder learned from a Brobeck trial attorney that Vogel was involved in asbestos litigation. In a March 31 letter, Snyder asked Harrison if Vogel’s duties included asbestos litigation. Harrison responded to Snyder by letter on April 6. In the letter, Harrison stated Vogel told Snyder his work for the Harrison firm would include periodic work on asbestos cases, and that Harrison assumed there was no conflict of interest. Harrison also asked Snyder to provide details of the basis for any claimed conflict. There were no other communications between Brobeck and the Harrison firm concerning Vogel before the disqualification motion was filed.
In June, a Harrison firm attorney asked Vogel to call respondent Fibreboard Corporation to see if it would accept service of a subpoena for its corporate minutes. Vogel called the company and spoke to a person he knew from working for Brobeck. Vogel asked who should be served with the subpoena in place of the company’s retired general counsel. Vogel’s call prompted renewed concern among respondents’ counsel over Vogel’s involvement with asbestos litigation for a plaintiffs’ firm. On July 31, counsel for three respondents demanded that the Harrison firm disqualify itself from cases against those respondents. Three days later, the motion to disqualify the Harrison firm was filed; it was subsequently joined by all respondents.
The trial court held a total of 21 hearing sessions on the motion, including 16 sessions of testimony. During the hearing, several witnesses testified that Vogel liked to talk, and the record indicates that he would volunteer information in an effort to be helpful.
A critical incident involving Vogel’s activities at Brobeck first came to light during the hearing. Brobeck’s computer system access log showed that on November 17, 1988, Vogel accessed the computer records for 20 cases filed by the Harrison firm. On the witness stand, Vogel at first flatly denied having looked at these case records, but when confronted with the access log, he admitted reviewing the records “to see what kind of cases [the Harrison firm] had filed.” At the time, Vogel had no responsibilities for any Harrison firm cases at Brobeck. The date Vogel reviewed those computer records was very close to the time Vogel and Harrison first spoke. The access log documented that Vogel opened each record long enough to view and print copies of all the information on the case in the computer system.
Vogel, Harrison, and the other two witnesses from the Harrison firm denied that Vogel ever disclosed any client confidences obtained while he worked for Brobeck. However, Harrison never instructed Vogel not to discuss any confidential information obtained at Brobeck. Vogel did discuss with Harrison firm attorneys his impressions of several Brobeck attorneys. After the disqualification motion was filed, Harrison and his office manager debriefed Vogel, not to obtain any confidences but to discuss his duties at Brobeck in detail and to assess respondents’ factual allegations. During the course of the hearing, the Harrison firm terminated Vogel on August 25, 1989.
The trial court found that Vogel’s work for Brobeck and the Harrison firm was substantially related, and that there was no express or implied waiver by Brobeck or its clients. The court believed there was a substantial likelihood that the Harrison firm’s hiring of Vogel, without first building “an ethical wall” or having a waiver, would affect the outcome in asbestos cases. The court also found that Vogel obtained confidential information when he accessed Brobeck’s computer records on the Harrison firm’s cases, and that there was a reasonable probability Vogel used that information or disclosed it to other members of the Harrison firm’s staff. The court refused to extend the disqualification beyond those cases where there was tangible evidence of interference by Vogel, stating that on the rest of the cases it would require the court to speculate.
The trial court initially disqualified the Harrison firm in all 20 cases Vogel accessed on November 17, 1988, which included 11 cases pending in Contra Costa County. However, on further consideration, the trial court restricted its disqualification order to the 9 cases pending in San Francisco. . . .
Our statutes and public policy recognize the importance of protecting the confidentiality of the attorney-client relationship. . . . The obligation to maintain the client’s confidences traditionally and properly has
p. 234
been placed on the attorney representing the client. But nonlawyer employees must handle confidential client information if legal services are to be efficient and cost-effective. Although a law firm has the ability to supervise its employees and assure that they protect client confidences, that ability and assurance are tenuous when the nonlawyer leaves the firm’s employment. If the nonlawyer finds employment with opposing counsel, there is a heightened risk that confidences of the former employer’s clients will be compromised, whether from base motives, an excess of zeal, or simple inadvertence.
Under such circumstances, the attorney who traditionally has been responsible for protecting the client’s confidences—the former employer—has no effective means of doing so. The public policy of protecting the confidentiality of attorney-client communications must depend upon the attorney or law firm that hires an opposing counsel’s employee. Certain requirements must be imposed on attorneys who hire their opposing counsel’s employees to assure that attorney-client confidences are protected. . . .
Hiring a former employee of an opposing counsel is not, in and of itself, sufficient to warrant disqualification of an attorney or law firm. However, when the former employee possesses confidential attorney-client information, materially related to pending litigation, the situation implicates “considerations of ethics which run to the very integrity of our judicial process.” [Citations omitted.] Under such circumstances, the hiring attorney must obtain the informed written consent of the former employer, thereby dispelling any basis for disqualification. [Citations omitted.] Failing that, the hiring attorney is subject to disqualification unless the attorney can rebut a presumption that the confidential attorney-client information has been used or disclosed in the new employment. . . .
An inflexible presumption of shared confidences would not be appropriate for nonlawyers, though, whatever its merits when applied to attorneys. There are obvious differences between lawyers and their nonlawyer employees in training, responsibilities, and acquisition and use of confidential information. These differences satisfy us that a rebuttable presumption of shared confidences provides a just balance between protecting confidentiality and the right to chosen counsel.
The most likely means of rebutting the presumption is to implement a procedure, before the employee is hired, which effectively screens the employee from any involvement with the litigation, a procedure one court aptly described as a “cone of silence.” (See Nemours Foundation v. Gilbane, Aetna, Federal Ins. (D. Del. 1986) 632 F. Supp. 418, 428.) Whether a potential employee will require a cone of silence should be determined as a matter of routine during the hiring process. It is reasonable to ask potential employees about the nature of their prior legal work; prudence alone would dictate such inquiries. Here, Harrison’s first
p. 234
p. 235
conversation with Vogel revealed a potential problem—Vogel’s work for Brobeck on asbestos litigation settlements. . . .
Two objectives must be achieved. First, screening should be implemented before undertaking the challenged representation or hiring the tainted individual. Screening must take place at the outset to prevent any confidences from being disclosed. Second, the tainted individual should be precluded from any involvement in or communication about the challenged representation. To avoid inadvertent disclosures and to establish an evidentiary record, a memorandum should be circulated warning the legal staff to isolate the individual from communications on the matter and to prevent access to the relevant files. . . .
We decline to adopt the broader rule urged by respondents and applied by other courts, which treats the nonlawyer employee as an attorney and requires disqualification upon the showing and standards applicable to individual attorneys. . . .
Respondents’ alternative formulation, that a substantial relationship between the type of work done for the former and present employers requires disqualification, presents unnecessary barriers to employment mobility. Such a rule sweeps more widely than needed to protect client confidences. We share the concerns expressed by the American Bar Association’s Standing Committee on Ethics and Professional Responsibility: “It is important that nonlawyer employees have as much mobility in employment opportunity as possible consistent with the protection of clients’ interests. To so limit employment opportunities that some nonlawyers trained to work with law firms might be required to leave the careers for which they are trained would disserve clients as well as the legal profession. Accordingly, any restrictions on the nonlawyer’s employment should be held to the minimum necessary to protect confidentiality of client information.” (ABA Ethics Opinion 88-1526.) Respondents’ suggested rule could easily result in nonlawyer employees becoming “Typhoid Marys,” unemployable by firms practicing in specialized areas of the law where the employees are most skilled and experienced.
Absent written consent, the proper rule and its application for disqualification based on nonlawyer employee conflicts of interest should be as follows. The party seeking disqualification must show that its present or past attorney’s former employee possesses confidential attorney-client information materially related to the proceedings before the court. The party should not be required to disclose the actual information contended to be confidential. However, the court should be provided with the nature of the information and its material relationship to the proceeding. [Citations omitted.]
Once this showing has been made, a rebuttable presumption arises that the information has been used or disclosed in the current employment. The presumption is a rule by necessity because the party seeking disqualification will be at a loss to prove what is known by the adversary’s attorneys and legal staff. [Citations omitted.] To rebut the presumption,
p. 235
p. 236
the challenged attorney has the burden of showing that the practical effect of formal screening has been achieved. The showing must satisfy the trial court that the employee has not had and will not have any involvement with the litigation, or any communication with attorneys or coemployees concerning the litigation, that would support a reasonable inference that the information has been used or disclosed. If the challenged attorney fails to make this showing, then the court may disqualify the attorney and law firm. . . .
There can be no question that Vogel obtained confidential attorney-client information when he accessed the Harrison firm’s case files on Brobeck’s computer. . . .
The Harrison firm also argues that there was no evidence that Vogel disclosed any confidences to any member of the firm, or that any such information was sought from or volunteered by Vogel. Harrison testified that he never asked Vogel to divulge anything other than impressions about three Brobeck attorneys. Harrison and his office manager also testified that Vogel was not involved in case evaluation or trial tactics discussions at the Harrison firm. However, this evidence is not sufficient to rebut the presumption that Vogel used the confidential material or disclosed it to staff members at the Harrison firm. Moreover, there was substantial evidence to support a reasonable inference that Vogel used or disclosed the confidential information.
Despite Harrison’s own concern over an appearance of impropriety, Harrison never told Vogel not to discuss the information Vogel learned at Brobeck and did not consider screening Vogel even after Brobeck first inquired about Vogel’s work on asbestos cases. The evidence also amply supports the trial court’s observation that Vogel was “a very talkative person, a person who loves to share information.” Further, Vogel’s willingness to use information acquired at Brobeck, and the Harrison firm’s insensitivity to ethical considerations, were demonstrated when Vogel was told to call respondent Fibreboard Corporation and Vogel knew the person to contact there. . . .
The order of the trial court is affirmed. . . .
Questions about the Case
1.Did Vogel actually work on any of the cases from which his employer Harrison is being disqualified? Did Vogel possess any confidential information about these cases? How did he obtain it and why?
2.Did Harrison do a conflicts check on Vogel? Did he attempt to screen Vogel from working on cases that he had worked on at Brobeck? Did he admonish Vogel not to reveal any confidential information about these cases?
3.Did Vogel get consent from the clients involved? From the Brobeck firm?
p. 236
Phoenix Founders, Inc. v. Marshall
887 S.W.2d 831 (Tex. 1994)
In this original proceeding, we consider whether a law firm must be disqualified from ongoing litigation because it rehired a legal assistant who had worked for opposing counsel for three weeks. We hold that disqualification is not required if the rehiring firm is able to establish that it has effectively screened the paralegal from any contact with the underlying suit. Because this standard had not been adopted in Texas prior to the trial court’s disqualification order, we deny mandamus relief without prejudice to allow the trial court to reconsider its ruling in light of today’s opinion.
The present dispute arises from a suit brought by Phoenix Founders, Inc. and others (“Phoenix”) to collect a federal-court judgment against Ronald and Jane Beneke and others. The law firm of Thompson & Knight represented Phoenix in the original federal-court suit, which began in 1990 and ended in 1991, and has also represented them in the collection suit since its commencement in 1992. The Benekes have been represented in the latter suit by the firm David & Goodman.
In July of 1993, Denise Hargrove, a legal assistant at Thompson & Knight, left her position at that firm to begin working for David & Goodman as a paralegal. While at David & Goodman, Hargrove billed six-tenths of an hour on the collection suit for locating a pleading. She also discussed the case generally with Mark Goodman, the Benekes’ lead counsel.
After three weeks at David & Goodman, Hargrove returned to Thompson & Knight to resume work as a paralegal. At the time of the rehiring, Thompson & Knight made no effort to question Hargrove in regard to potential conflicts of interest resulting from her employment at David & Goodman.
p. 237
p. 238
Three weeks after Hargrove had returned, counsel for the Benekes wrote to Thompson & Knight asserting that its renewed employment of Hargrove created a conflict of interest. The letter demanded that the firm withdraw from its representation of Phoenix.
Hargrove resigned from Thompson & Knight the next week, after having been given the option of either resigning with severance pay or being terminated. The firm itself, however, refused to withdraw from the case. The Benekes then filed a motion to disqualify. . . .
The disqualification order states that Hargrove possesses confidential information relating to the Benekes, and that all such confidential information was imputed to the firm of Thompson & Knight at the time she was rehired.
This Court has not previously addressed the standards governing a disqualification motion based on the hiring of a nonlawyer employee. With respect to lawyers, however, this Court has adopted a standard requiring disqualification whenever counsel undertakes representation of an interest that is adverse to that of a former client, as long as the matters embraced in the pending suit are “substantially related” to the factual matters involved in the previous suit. [Citation omitted.] This strict rule is based on a conclusive presumption that confidences and secrets were imparted to the attorney during the prior representation. [Citation omitted.]
The Benekes argue that the standards applied to the hiring of lawyers should also apply to the hiring of paralegals. . . . [T]he Benekes urge that the entire firm of Thompson & Knight must be automatically disqualified because of the confidences Hargrove obtained while working at David & Goodman.
We agree that a paralegal who has actually worked on a case must be subject to . . . a conclusive presumption that confidences and secrets were imparted during the course of the paralegal’s work on the case. . . .
We disagree, however, with the argument that paralegals should be conclusively presumed to share confidential information with members of their firms. The Disciplinary Rules require a lawyer having direct supervisory authority over a nonlawyer to make reasonable efforts to ensure that the nonlawyer’s conduct is compatible with the professional obligations of the lawyer. Tex. Disciplinary R. Prof. Conduct 5.03(a). If the supervising lawyer orders, encourages, or even permits a nonlawyer to engage in conduct that would be subject to discipline if engaged in by a lawyer, the lawyer will be subject to discipline. R. 5.03(b). Thus, to the extent that the Disciplinary Rules prohibit a lawyer from revealing confidential information, R. 1.05(b)(1), they also prohibit a supervising lawyer from ordering, encouraging, or permitting a nonlawyer to reveal such information.
This view is consistent with the weight of authority in other jurisdictions. The American Bar Association’s Committee on Professional Ethics has considered whether a law firm that hires a paralegal may
p. 238
p. 239
continue representing clients whose interests conflict with interests of the former employer’s clients on whose matters the paralegal has worked. ABA Ethics Informal Op. 1526 (1988). After surveying case law and ethics opinions from a number of jurisdictions, the Committee concluded that the new firm need not be disqualified, as long as the firm and the paralegal strictly adhere to the screening process set forth in the opinion, and as long as the paralegal does not reveal any information relating to the former employer’s clients to any person in the employing firm. Id. A number of courts have since relied on the ABA’s opinion to allow continued representation under similar conditions. [Citations omitted.]
Underlying these decisions is a concern regarding the mobility of paralegals and other nonlawyers. A potential employer might well be reluctant to hire a particular nonlawyer if doing so would automatically disqualify the entire firm from ongoing litigation. This problem would be especially acute in the context of massive firms and extensive, complex litigation. Recognizing this danger, the ABA concluded that “any restrictions on the nonlawyer’s employment should be held to the minimum necessary to protect confidentiality of client information.” ABA Op. 1526 at 2. [Citations omitted.]
We share the concerns expressed by the ABA, and agree that client confidences may be adequately safeguarded if a firm hiring a paralegal for another firm takes appropriate steps in compliance with the Disciplinary Rules. See ABA Op. 1526 at 3. Specifically, the newly-hired paralegal should be cautioned not to disclose any information relating to the representation of a client of the former employer. The paralegal should also be instructed not to work on any matter on which the paralegal worked during the prior employment, or regarding which the paralegal has information relating to the former employer’s representation. Additionally, the firm should take other reasonable steps to ensure that the paralegal does no work in connection with matters on which the paralegal worked during the prior employment, absent client consent after consultation. See id.
Each of these precautions would tend to reduce the danger that the paralegal might share confidential information with members of the new firm. Thus, while a court must ordinarily presume that some sharing will take place, the challenged firm may rebut this presumption by showing that sufficient precautions have been taken to guard against any disclosure of confidences.
Absent consent of the former employer’s client, disqualification will always be required under some circumstances, such as (1) when information relating to the representation of an adverse client has in fact been disclosed, or (2) when screening would be ineffective or the nonlawyer necessarily would be required to work on the other side of a matter that is the same as or substantially related to a matter on which the nonlawyer has previously worked. . . .
In reconsidering the disqualification motion, the trial court should examine the circumstances of Hargrove’s employment at
Knight to determine whether the practical effect of formal screening has been achieved. The factors bearing on such a determination will generally include the substantiality of the relationship between the former and current matters; the time elapsing between the matters; the size of the firm; the number of individuals presumed to have confidential information; the nature of their involvement in the former matter; and the timing and features of any measures taken to reduce the danger of disclosure.
The ultimate question in weighing these factors is whether Thompson & Knight has taken measures sufficient to reduce the potential for misuse of confidences to an acceptable level. As with any disqualification motion, the trial court must adhere to an exacting standard so as to discourage any use of a disqualification motion as a dilatory tactic. . . .
Because we have modified the controlling legal standard, the writ of mandamus is denied without prejudice to allow the trial court to reconsider the disqualification motion in light of today’s opinion. The stay order previously issued by this Court remains in effect only so long as necessary to allow the trial court to act.
Questions about the Case
1.Was the paralegal Hargrove aware of the potential conflict of interest? Did she work on the Phoenix Founders matter at Thompson & Knight either before she went to David & Goodman or after?
2.Did David & Goodman do a conflicts check?
3.Did Thompson & Knight attempt to screen Hargrove from the Phoenix Founders matter on her return to the firm?
4.What is the standard applied to lawyers in disqualification motions in Texas courts? Does the court apply this same standard to paralegals?
5.What authority does the Texas Supreme Court rely on to make this new rule?
6.What specific steps does the court prescribe to establish an acceptable safeguard against the disclosure of client confidences?
7.Did the Texas Supreme Court here decide whether to disqualify Thompson & Knight?