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5th Circuit to Interpret Departing-Lawyer Rule
Texas Lawyer
October 19, 2009
The 5th U.S. Circuit Court of Appeals heard arguments on Oct. 8 in a case that could affect every lawyer who leaves a law firm for other legal employment.
The key question the court is considering in Kirk A. Kennedy and Mark A. D'Andrea v. Mindprint Inc. is this: Is there a rebuttable or irrebuttable presumption that an attorney had the confidences of all of the firm's clients when he left the firm?
Three legal ethics experts say the decision in the conflict-of-interest case is important to lawyers who work in firms with hundreds of clients. Should the 5th Circuit uphold lower court rulings in the case, a lawyer who leaves a firm could be prevented from ever representing a party that is adverse to a client of his former firm -- even if the attorney had no contact with the client while he worked there, the experts say.
According to both parties' briefs, the background in the complicated bankruptcy case, which contains numerous appeals, cross-claims and an attorney fee dispute, is as follows: Kennedy worked as a senior counsel in the bankruptcy section at the Houston office of Jackson Walker from 2003 until 2004. He left the firm and later became in-house counsel at Gulf Coast Cancer Center, where D'Andrea is the medical director.
In 2006, Kennedy began representing D'Andrea as a creditor in a bankruptcy case, In Re: ProEducation International Inc., pending before U.S. Bankruptcy Judge Karen Brown in the Southern District of Texas. Mindprint Inc. is adversarial to D'Andrea in the case and is a client of Jackson Walker. Mindprint filed a motion with Brown to disqualify Kennedy from representing D'Andrea, arguing that Kennedy had a conflict of interest because he was employed by Jackson Walker while Mindprint was the firm's client. Kennedy later testified during a disqualification hearing that he had never performed legal work for Mindprint while employed at Jackson Walker and did not even know the company was a client until after he left the firm. After a series of hearings, Brown issued an order in March 2008 that disqualified Kennedy from representing D'Andrea in the bankruptcy litigation.
Kennedy and D'Andrea appealed to U.S. District Judge Lynn Hughes, and the style of the case changed to Kirk A. Kennedy and Mark A. D'Andrea v. Mindprint Inc . Hughes affirmed Brown's ruling, so Kennedy and D'Andrea appealed to the 5th Circuit. In their brief, they argued that Hughes improperly interpreted Rule 1.09(a) of the Texas Disciplinary Rules of Professional Conduct by finding Kennedy was " irrebuttably presumed to have acquired all confidential communications of clients of the firm." Rule 1.09(a) prevents a lawyer from representing a client that is adverse to a former client that the attorney had "personally" represented.
Mindprint argued in its brief to the 5th Circuit that Hughes interpreted Rule 1.09(a) correctly because "the imputation of knowledge about the substance of a client's representation to attorneys within the same law firm mandated by the case law is appropriate here, particularly (as noted by Judge Hughes) where Kennedy officed on the same floor just down the hall from MindPrint's counsel during the entirety of his tenure with Jackson Walker."
RULE 1.09
Texas Lawyer listened to an audio recording of the oral arguments before the 5th Circuit on Oct. 8. Kennedy began by telling told the three judges -- Fortunato "Pete" Benavides, Carolyn Dineen King and Eugene Davis -- that the issue presented in the case and their interpretation of the so-called "the departing lawyer rule" found in Rule 1.09 was an important one for the legal profession in Texas.
"The touchstone of this appeal focuses on one legal issue that this court should decide and correct the error of the bankruptcy court. And that one legal ethical issue is this: When an attorney leaves a law firm, is the presumption that the attorney acquired client confidences irrebuttable or rebuttable? That's the issue that this court needs to decide today," Kennedy said, arguing that such a presumption is rebuttable.
"I've not seen a case in any of the circuits or reported opinions that squarely address on all fours the departing lawyer rule," he said. "And that's why this rule and this decision today is so important to the legal profession. This goes to the ability of attorneys to move between firms in the megafirm context."
Benavides said to Kennedy, "It would seem to me that the judge's order as directed to you has disqualified you in terms of any person in your former law firm whether you knew about them or didn't know about it and that that presumption is irrebutable. I don't know why your ability to practice law hasn't been severely impacted by this order."
"I agree with the court entirely," Kennedy said.
