Risk Update

Law Firm Risk News — PA Superior Court Cements Lateral Conflicts Standards, Insurer Questionnaire Conflict Question Results in Rescission

Split Superior Court Panel Rules a Lateral Hire’s Conflict Disqualifies a Whole Firm” —

  • “The Pennsylvania Superior Court has sent a cautionary message to all lawyers who make lateral moves—and their new firms. In a 2-1 split, the court ruled Tuesday that an entire firm must be disqualified from handling a personal injury lawsuit because one of its lawyers formerly represented the defendant while working for another firm years earlier.”
  • “The decision cements a standard for determining whether a firm should be disqualified for an individual lawyer’s involvement with the opposing party.”
  • “Rule 1.10(b) of the Pennsylvania Rules of Professional Conduct addresses circumstances when attorneys’ past clients’ interests conflict with the interests of clients at their current firm. It notes exceptions for circumstances when a lawyer is screened from participation with the potentially conflicting matter and the lawyer gives notice to the former client.”
  • “The Superior Court… weighed the circumstances against five factors: the substantiality of the relationship between the attorney and former client; the time elapsed between conflicting disputes; the size of the involved firm and number of disqualified attorneys; the nature of the attorneys’ involvement; and the timing of the wall. It also took into account the strength of the wall.”
  • “‘Our review reveals no precedential Pennsylvania authority with a controlling analysis for the adequacy of a law firm’s conflict protocol,” Murray said. So the court used “numerous non-precedential Pennsylvania decisions’ to evaluate the effectiveness of a conflict-of-interest protocol the Munley law firm put in place only after hiring Mulcahey and initiating this lawsuit. Murray said the fact that Munley is a small firm of about 10 lawyers makes it harder to avoid sharing sensitive information about previous clients and strategy.”

Law Firm’s Misrepresentations in Insurance Application Warrant Recission Under Utah Statute”

  • “The United States District Court for the District of Utah, applying Utah law, has held that a law firm’s representation in its insurance application that it lacked knowledge of any incident, act, error, or omission that could be the basis of a claim, constituted a material misrepresentation in light of a former client’s threats of a claim against the firm and a judicial finding of improper conduct, warranting recission of the policy under Utah statutory law. Travelers Cas. & Sur. Co. of Am. v. Grimmer Davis Revelli & Ballif, P.C., 2021 WL 5234373 (D. Utah Nov. 10, 2021).”
  • “In June 2018, a former client of the firm filed a motion to disqualify the firm from a series of probate actions in Wyoming, citing conflicts of interest and breaches of professional duties, and stating that the former client had claims against the firm. In December 2018, the former client again stated that she intended to assert claims against the firm and would seek “substantial” damages. In March 2019, a special master issued a report finding improper joint representation and conflicts of interest by the firm and recommending disqualification, which the court accepted. Similarly, the court in a related litigation in South Carolina disqualified the firm based on conflicts of interest.”
  • “In April 2019, the firm sought liability insurance for a retroactive March 20, 2018 to March 20, 2019 policy period. In its application, the firm responded ‘no’ to the question whether ‘you or any member or employee of your firm have knowledge of any incident, act, error, or omission that is or could be the basis of a claim under this proposed professional liability policy[.]’ The firm also provided a letter confirming that ‘we are not aware of any facts, circumstances, or losses from the period of March 20, 2019 to the present as respects our lawyers’ professional lawyers insurance.’ After the policy issued, the former client asserted a malpractice claim against the firm. The insurer sought to rescind the policy based on the firm’s material misrepresentations during the application process and on the underwriter’s testimony that, had the firm disclosed the former client’s assertions and the courts’ findings, the insurer would not have issued the policy.”