“Key Amendments to the New York Rules of Professional Conduct” —

• “Earlier this year the presiding justices of the four Appellate Divisions issued a Joint Order approving amendments to the New York Rules of Professional Conduct. The amendments, which were proposed last year by the New York State Bar Association Committee on Standards of Attorney Conduct (COSAC) significantly alter Rule 1.10, which deals with the imputation of conflicts of interest, and Rule 3.4 regarding fairness to opposing parties and counsel.”
• “Rule 1.10(a) and the Imputation of Personal Interest Conflicts. Prior to its amendment, Rule 1.10(a) stated: ‘While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rule 1.7 [concurrent representation conflicts], 1.8 [special conflicts of interest] or 1.9 [successive representation conflicts], except as otherwise provided therein. ‘What this meant was that, as a general rule, if one lawyer in a firm was conflicted from representing a client, regardless of the reason, then every other lawyer in the firm would be similarly prohibited from undertaking the representation, regardless of the degree of separation between the conflicted lawyer and the other lawyers in the firm.”
• “Suppose, for example, that Lawyer A is approached about taking on a litigation adverse to a company in which Lawyer A’s spouse owns shares. Lawyer A may be prohibited from taking on the representation if there is a significant risk that Lawyer A’s judgment on behalf of the potential client would be limited by Lawyer A’s financial interest in the company (either directly or indirectly). See NY Rule 1.7(a)(2) (prohibiting representation where ‘there is a significant risk that the lawyer’s professional judgment on behalf of a client will be adversely affected by the lawyer’s own financial, business, property or other personal interests.’)”
• “Under the old version of Rule 1.10, Lawyer A’s conflict would be imputed to the rest of Lawyer A’s firm, regardless of its size or the impact that Lawyer A’s conflict actually had on the other lawyers in the firm.In other words, if there was a significant risk that Lawyer A’s judgment could be impaired by the conflict then that significant risk was imputed to the rest of the firm.”
• “The amendments to Rule 1.10(a) make clear that these type of personal interest conflicts generally will not be imputed to the rest of the firm so long as (1) the conflict is ‘based on a lawyer’s own financial, business, property or other personal interests within the meaning of Rule 1.7(a)(2)’ and (2) a reasonable lawyer would conclude that there is no significant risk that the representation by the other lawyers in the firm would be materially limited or that the independent judgment of those lawyers would be adversely effected. See NY Rule 1.10(a)(1)-(2).This amendment gives law firms more flexibility to assess personal interest conflicts on a case-by-case basis and determine whether a conflict as to the remainder of the firm is actually present.”
• “Rule 1.10(b) and a Law Firm’s Retention of Former Client Information. The courts also updated Rule 1.10(b) to clarify that when all of the lawyers who previously worked on a matter have left the firm, a law firm will not be disqualified from a representation simply because the firm is still in possession of files related to the former client.”
• “While the prior version of Rule 1.10(b) prohibited a representation if ‘the firm’ had confidential information belonging to the former client, the amended version of Rule 1.10(b) only mandates disqualification if ‘any lawyer remaining at the firm has actual knowledge or, or has accessed’ the former client’s confidential information.”
• “Rule 1.10(c) and Screening of Lateral Lawyers. The courts amended Rule 1.10(c) to expressly permit screening of lateral lawyers in certain instances. This is a major development. Before the amendment, Rule 1.10 would impute a lateral lawyer’s conflicts to the new firm in all instances except where the lateral lawyer did not acquire confidential information that was material to the matter at issue.”
• “In practice, this meant that, absent the narrow exception described above, if a lateral lawyer was conflicted from a representation because of the lawyer’s affiliation with their prior firm, the lateral lawyer’s conflict would be imputed to the remainder of the new firm and could be used as a basis to disqualify the new firm.”
• “The recent amendments to Rule 1.10(c) bring the rule closer to Model Rule 1.10(a)(2), which allows screening for lateral lawyers to avoid imputation of conflicts caused by the lawyer’s decision to join a new firm.”
• “While Model Rule 1.10(a)(2) permits screening of lateral lawyers under all circumstances, the amended version of New York Rule 1.10(c) permits screening of lateral lawyers except ‘where the matter is a litigation, arbitration, or other adjudicative proceeding and the newly associated lawyer, while associated with the prior firm, either (i) substantially participated in the management and direction of the matter, or (ii) had substantial decision-making responsibility in the matter on a continuous day-to-day basis.'”
• “In other words, while the new Rule 1.10(c) allows a screen to prevent the imputation of conflicts brought over by lateral lawyers in many circumstances, it will not prevent imputation of conflicts from a lateral lawyer who was a lead lawyer in a litigation matter and has decided to join the firm on the other side of the matter.”
  However, notwithstanding this limitation in the rules, it remains to be seen whether courts, which have generally approved screening, will draw the same distinction when evaluating motions to disqualify. Accord Hempstead Video, Inc. v. Incorporated Village of Valley Stream, 409 F.3d 127, 132 (2d Cir. 2005); Maricultura del Norte, S. de R.L. de C.V. v. Worldbusiness Capital, Inc., 2015 WL 1062167 (S.D.N.Y. March 9, 2015).”
• “As noted, this is a significant development in the New York Rules. Law firms and lawyers looking to move firms regularly struggle to navigate the complicated web of conflicts. How best to do that is the subject of another article, however, the change to allow screening to cure many of the run-of-the-mill conflicts that come up in lateral transitions is a significant step forward.”

“ORDER GRANTING MOTION TO DISQUALIFY DEFENDANT JUMIO’S COUNSEL PERKINS COIE” —

• “The Asserted Patents claim a priority date of July 2015. Perkins represented FaceTec on general corporate and intellectual property mattersduring FaceTec’s infancy, mostly in 2014 and 2015. At the time, FaceTec’s only product was ZoOm. During the course of its representation, Perkins’attorneys served as FaceTec’s outside general counsel and corporate secretary, and worked on FaceTec’s patent prosecution strategy to protect ZoOm. Through an affiliated entity, Perkins took an equity stake in FaceTec as part of its compensation. FaceTec contends thatit gave Perkins confidential information in this era that is nowmaterial to the current litigation.”
• “Inassessing whether the Asserted Patents were obvious as of the claimed July 2015priority date, a potentially key issue will be whether ZoOm’s commercial success at that time was attributable to theinnovative nature of thepatented features,rather than other differentiators. FaceTec’s CEO, Kevin Tussy,attests thatin 2014 and 2015,he provided Perkinswith confidential information about what FaceTec believed made ZoOm innovative. For example, in August 2015, Tussy sent a slide deck to Perkins, which identifiedZoOm’skey differentiators over competing products.Moreover, Tussy attests thatduring that time period,he discussed FaceTec’sstrategies for public relations, investments, marketing, and patent protection of the ZoOm technologywith Perkins’ attorneys. Perkins does not deny it received this information.”
• “It is understandable that Perkins concluded there was no conflict of interestbecause the firmdidnot prosecute the Asserted Patentsor other applications to which the Asserted Patents claim priority, and its patent prosecution work did not relate to the patented technology at issue. Nonetheless,there is a substantial risk that the information acquired by Perkins through its prior representation of FaceTec will become material to the current lawsuit. Therefore,the motion to disqualify Perkins as counselfor Jumio in this litigationis GRANTED.”
• “Perkins’ representation of FaceTec began in early 2014. In February of that year, Lowell Ness—a corporate partner at Perkins—executed a retainer agreement with FaceTec on behalf of the law firm.”
• “Based on the information in the record, it does not appear that Perkins’ patent prosecution work was substantially related to the litigation currently before the Court, nor does FaceTec provide evidence to support that inference.Thus, Perkins’ specific patent prosecution workdoes not provide a basis for disqualification.”
• “By contrast, Perkins’ corporate work and intellectual property counseling is substantially related to the pending litigation. A substantial risk exists that, through its representation of FaceTec, Perkins learned of confidential information that could be material to the resolution of issues in this case.”
• “Finally, Perkins’ implementation of a cautionary screen to wall off any attorney who had previously performed work for FaceTec cannotcure the problem. Ness remains at the firm, and Becker was still associated with the firm at the time Perkins began representing Jumio in this case.”
• “Rule 1.10would allow a cautionary screen to be used to cure disqualification if (1) Perkins was being disqualified based on one of their attorneys’work for a prior firm or work in which that attorney did not substantially participate, and written notice of the screen was provided to the former client FaceTec, or (2)none of the attorneys that receivedthe confidential information at issue wasstill associated with Perkins. Neither of those situations applies here. Accordingly, under Rule 1.10(c), disqualification can only be avoided if the conflict is waived by the former client, FaceTec, whichhas not occurred.”
• “Perkins implemented its internal screen without informing FaceTec of the conflict,and has provided no explanation for that failure. Such notice to the former client is critical to make ‘the interested party aware of the potential threat to its confidential information and the measures taken to prevent the improper use or disclosure of such information’ and to provide ‘an enforcement mechanism, in that the interested party will be able to suggest measures to strengthen the wall, and to challenge any apparent breaches.’ Kirk v. First Am.Title Ins. Co., 108 Cal. Rptr. 3d 620, 648(Ct. App. 2010). No such notice was provided here.”
• For more background on this matter and dispute, see this earlier update.