California has now joined almost all other states in that its courts have become more practical about evaluating conflicts of interest-based disqualification motions related to lateral hiring, said several lawyers who frequently represent law firms.
The Golden State joined the pack on May 10 when the California Supreme Court opted to not hear California Self-Insurers’ Security Fund v. The Superior Court of Orange County, the lawyers said.
By doing so, California’s top court let stand a lower appellate ruling that did not automatically disqualify a firm because of a lateral hire. Specifically, the appellate court did not assume that once a lateral attorney joined a new firm, his knowledge was automatically “imputed” to that firm’s lawyers, thereby creating a conflict.
The specific lateral in question, Andrew Selesnick, had moved from Los Angeles-based Michelman & Robinson, which represented the defendants, to Nixon Peabody, which represented the plaintiffs. But Selesnick only stayed at Nixon Peabody for less than two months and claimed to have never worked during that time with a team of lawyers engaged in litigation involving both parties.
“This is all evolving because of the pragmatic realities and the practice of law is changing so much,” said Rebecca Lamberth, an Atlanta-based trial practice leader at Duane Morris who also serves in the firm’s general counsel office, about courts’ attitudes toward the development of potential conflicts due to lateral hiring.
The courts’ more open-minded view about attorney moves applies mostly to large firms, among which much of the lateral movement takes place, Lamberth said. Large firms, because of their size, are also more capable than smaller firms of effectively setting up ethical screens that prevent certain lawyers that could pose a conflict or otherwise from having access to related materials, conversations and knowledge.
But that doesn’t mean that large firms now have an advantage thanks to a change in court attitudes toward lateral moves and disqualifications, Lamberth said.
“The reality is that large firms are the ones that face this issue regularly and have been working to solve or address it through setting up Chinese walls,” she said. Lamberth noted that no such barriers could effectively be established in a 15-lawyer firm, although smaller firms often do not have the same volume of lateral hiring taking place.
Kevin Rosen, a litigation partner in the Los Angeles office of Gibson, Dunn & Crutcher and chairman of its law firm defense practice group, also paid close attention to the California ruling.
“The decision reflects a growing trend among a number of courts to take a more practical approach to conflict issues in certain areas, such as imputation,” he said.
By allowing the lower court’s ruling to stand, the California Supreme Court moved its state’s courts closer to the view that the majority of 49 other state courts have adopted on conflict questions. Most states’ court have accepted versions of a rule of imputed disqualification as defined by the American Bar Association’s Model Rules of Professional Conduct.
Typically, other states’ rules don’t automatically disqualify a firm if it hires a lawyer who represented an adverse party, but instead allow for ethical screens to be established under many circumstances. The underlying dispute in the California case was about workers’ compensation claims and liabilities.
In the litigation, Nixon Peabody’s client, the California Self-Insurers’ Security Fund, an Oakland-based nonprofit quasi-state agency, was pitted against multiple defendants that are self-insured employers. (Federal tax filings show that the Self-Insurers’ Security Fund paid $480,000 to Nixon Peabody in 2016-17.)
From 2009 to February 2017, Selesnick worked at Michelman & Robinson, where he handled claims for some of the defendants. On Feb. 1, 2017, he left the firm and joined Nixon Peabody in Los Angeles. Selesnick’s stay would be short-lived.
After six weeks, he left Nixon Peabody’s partnership on March 15, 2017, and joined Buchalter’s Los Angeles office. According to a ruling earlier this year by the California Fourth District Court of Appeal that the California Supreme Court recently declined to review, when Selesnick was hired by Nixon Peabody, his former firm, Michelman & Robinson, quickly raised the potential conflict issue.
For his part, Selesnick claimed that the defendants he worked with at his old firm had all settled their respective claims before he headed to Nixon Peabody, and that he retained no confidential information from any of the parties still in the litigation. But the defendants filed a motion to disqualify Nixon Peabody, arguing that Selesnick’s move to the firm created a conflict.
In response, Nixon Peabody argued that none of its lawyers received confidential information from Selesnick. The firm also claimed that Selesnick had been hired to work in its Los Angeles office, and the lawyers handling the underlying litigation were in San Francisco. Each Nixon Peabody team member filed a declaration stating they received no confidential information from Selesnick since the firm had erected an “ethical wall” once he came aboard.
Nicholas Roxborough, a name partner at Roxborough, Pomerance, Nye & Adreani in Woodland Hills, California, who at the trial court last year initially won a motion to disqualify Nixon Peabody from representing the plaintiff in the pending workers’ compensation dispute as a result of its hire of Selesnick, has accepted his reversal in the appellate courts.
The ABA’s professional conduct position “has been carrying the day” in states nationwide and now also in California, Roxborough said.
“The notion that you can switch sides in the middle of a litigation is troubling, but is consistent with the way courts are going,” Roxborough said. He noted that the disposition of the Nixon Peabody and Selesnick case will help “big firms where you can build Chinese walls,” but not much in the future for his 13-lawyer shop near Los Angeles.