Washington State Reverses Former Client Disqualification
The Washington State Supreme Court has reversed a Court of Appeals decision ordering disqualification under Rule 1.9 and offered important guidance in “former client” conflicts.
The court focuses on the factual overlap between the prior and present representation.
The situation
Richard and Debra Plein sued USAA Casualty Insurance Company, alleging insurance bad faith. The Pleins hired three attorneys, two of whom were members of the Keller Rohrback LLP law firm (Keller), to represent them. But Keller had previously defended USAA in bad faith litigation for over 10 years.
Under the Rules of Professional Conduct, RPC 1.9(a) would bar Keller from representing the current clients, the Pleins, against former client USAA if the prior representation was in a matter “substantially related” to the current Plein matter. We have never interpreted the meaning of this “substantially related” language under RPC 1.9(a). And since the last Court of Appeals decision interpreting this language, we amended the RPCs substantially and added two comments to guide our interpretation of RPC 1.9(a)’s “substantially related” language.
We now hold that under current RPC 1.9(a), USAA fails to show a “substantial risk” that Keller obtained “confidential factual information” that would “materially advance” the Pleins’ case. RPC 1.9 cmt. 3. Accordingly, Keller did not represent former client USAA on any matter “substantially related” to the instant case. We therefore reverse the Court of Appeals decision that disqualification was required and reinstate the trial court’s order that disqualification was not required.
The prior representation
Irene Hecht and her team at Keller represented USAA between 2007 and 2017. Clerk’s Papers (CP) at 29. According to Keller, that representation of USAA in Washington included “over 165 matters between August 2006 and November 2017” and Keller had access to the following information:
a. The business customs and practices, including confidential claims handling materials and business relationships with outside companies and vendors;
b. The thought processes of adjusters, business representatives, and in-house attorneys; and
c. Business and litigation philosophies and strategies, including approaches to settlement discussions, motion practice, case analysis, defenses, witness meetings, witness preparation,trial preparation, and discovery both on a case-by-case and institutional, company-wide level.
CP at 99. Further, Keller acknowledges that during the course of its representation of USAA, Keller
a. Had regular in-person and telephonic access to company employees, executives, and in-house attorneys relative to insurance claims and related Alleged Bad Faith Litigation;
b. Provided USAA CIC and its affiliated companies with advice, including as to insurance coverage matters, litigation strategies, factual positions, litigation mitigation recommendations for training and communication materials, and legal arguments; and
c. Was provided with electronic login credentials to certain internal proprietary and confidential documents regarding insurance bad faith litigation, including document repositories holding attorney-client information and electronic claim databases; and
d. Actively participated in court appearances, depositions,written court filings, correspondence, and mediations on behalf of USAA CIC and its affiliated entities.
CP at 100-01. Keller acted as USAA’s sole defense counsel against four bad faith claims in Washington. CP at 100. USAA alleged that Keller “had (and has) extensive knowledge of how USAA CIC’s adjusters analyze and handle homeowner’s insurance claims and the interplay of this knowledge with the companies’ litigation strategy and analysis in defending Alleged Bad Faith Litigation in Washington.” CP at 103.
Finally, between 2010 and 2012, Keller defended a USAA subsidiary in a Pierce County matter (Cueva matter) against allegations of “bad faith relating to the handling of the fire and smoke damage claim to their house.” CP at 102. In the Cueva matter, the Cuevas alleged that USAA “failed to provide adequate alternative housing” during repairs to their home after a fire. CP at 119.
The case here involved a 2016 home fire.
The Pleins hired attorney Joel Hanson to represent them in a lawsuit against USAA and Sterling, alleging insurance bad faith, violation of the Consumer Protection Act (CPA), ch. 19.86 RCW, and several other claims. CP at 142-44. Soon after filing the lawsuit, Hanson consulted with two Keller attorneys, William Smart and Ian Birk. CP at 8. The Pleins hired Smart and Birk to represent them along with Hanson. CP at 8-9.
USAA then demanded that Keller immediately withdraw from representing the Pleins due to a conflict of interest. CP at 60. USAA stated that it would move to disqualify if Keller did not comply within 24 hours. Id. USAA also stated that it would move to disqualify Hanson “on the grounds that his representation is likewise tainted by this direct conflict.” Id.
The court reviewed the disqualification
the question presented is whether the Plein matter is “substantially related” to any matter on which Keller previously represented USAA.
As to burden of proof
We now hold that the burden falls on the former client who seeks to disqualify an adverse party’s lawyer.
The governing ethics rule
In 2006, we amended RPC 1.9 and added numerous comments. Adoption of Rule 1.9, 157 Wn.2d at 1202. The parties agree that this rule and these comments now guide our analysis, but they emphasize different comments.
The court discusses the comments and interpretations from other courts
The current RPC 1.9 and its associated comments thus tell us to decide whether the former and current representation are factually related. If not, then they are not “substantially related” within the meaning of the rule. Keller did not represent USAA on the Plein matter or on anything factually related to the Plein matter. As a result, it did not represent USAA on any matter substantially related to the instant case, so it may now represent the Pleins.
Some courts have taken a “playbook” approach to disqualification. In Chugach Electric Ass’n v. United States Dist. Court for District of Alaska, 370 F.2d 441, 442 (9th Cir. 1966), an attorney brought an antitrust action against a corporation where he had previously served as general counsel. Despite no showing that the lawyer “‘had access to secret or confidential information related to the issues’” in the case, the Ninth Circuit disqualified him. Id. at 443. It did so because the lawyer’s general representation of the corporation could “provide him with greater insight and understanding of the significance of subsequent events in an antitrust context and offer a promising source of discovery.” Id.
That was 1966. Since that time, the model rules have changed. The RPC and ABA Model Rule comments now flatly reject this “playbook” approach to disqualification motions.
…USAA also contends that Keller breached the “duty of loyalty” it owed to USAA. Suppl. Br. of Resp’t at 5-6. But there is no separate “duty of loyalty” under RPC 1.9 beyond the test outlined in RPC 1.9.
No imputation of the “playbook” to the present team
Because RPC 1.9(c) does not prohibit representation, confidential client information Hecht may have obtained about USAA that is not substantially related to the Plein matter is not imputed to Smart or Birk through RPC 1.10(a). Rather, RPC 1.9(c) would forbid Hecht herself from using any unrelated confidences she obtained in her representation of USAA against USAA. Neither Smart nor Birk possess any such confidences. Therefore, RPC 1.9(c) does not limit Smart’s or Birk’s representation of the Pleins.
CONCLUSION
Keller represented USAA for many years, and the parties agree that it obtained information about the company’s procedures and general strategies. But it never represented USAA on any matter substantially related to the Plein matter. Thus, RPC 1.9(a) does not prohibit Keller from representing the Pleins against USAA.
Justice McCloud authored the unanimous opinion. (Mike Frisch)