Court: Screening doesn't save firm from disqualification

Lawyer was determined to have ‘substantial’ role in disputed property case

By Pat Murphy
The Daily Record Newswire
BOSTON — The specter of disqualification can unexpectedly raise its ugly head whenever a lawyer switches firms.

One law firm just learned that it could not avoid disqualification in a long-running real property case — no matter what it did to screen a new hire from the litigation.

The client left in the lurch with trial looming is construction contractor Gandy Dancer, LLC of Albuquerque, New Mexico. Several years ago, BNSF Railway hired Gandy Dancer to construct large berms, dykes and channels to divert water away from a section of railroad tracks. Part of the work was performed on property owned by Roy D. Mercer, LLC.

BNSF claimed it had an easement through Mercer’s property dating back to 1936. Mercer contested the easement and threatened to remove the newly constructed earthworks. In 2008, BNSF sued in state court to protect its easement. Mercer responded by suing BNSF for inverse condemnation and Gandy Dancer for trespass.

Shortly after the opening salvoes were fired in the lawsuit, Mercer retained the Wagner Ford Law Firm. Lisa Ford was an associate in the firm and actively involved in the BNSF/Gandy Dancer litigation. As one of Mercer’s attorneys, Ford was privy to all strategy and case management decisions.

Wagner Ford ceased representing Mercer in late 2010. Around the same time, Ford left Wagner Ford. But Lisa Ford’s part in this saga was not over.
In July2012, as the BNSF/Gandy Dancer case was heading towards trial in state court, Ford was hired as a new associate by Riley, Shane & Keller, which just happened to represent Gandy Dancer in the real property dispute with Mercer.

Upon learning of this, Mercer immediately moved to disqualify the Riley firm on the ground of conflict of interest. The New Mexico Rules of Professional Conduct includes provisions regarding conflicts of interest that should be fairly familiar to attorneys across the country.

Of course, Ford had a clear conflict of interest because she had previously represented Mercer in the same matter and her role had been substantial.
Moreover, New Mexico rules regarding imputation of conflicts of interest to law firms placed Riley’s continued representation of Gandy Dancer squarely in jeopardy. In particular, Rule 16-110(C) provides that, when a law firm hires a new associate, any conflict the associate would have individually, is imputed to the entire firm.

Riley thought it could avoid disqualification by implementing procedures to screen Ford from the Mercer litigation.

The trial court was sympathetic and refused to disqualify Riley. The trial court reasoned that Riley’s client, Gandy Dancer, was an innocent bystander that would be severely harmed if it had to hire substitute counsel on the eve of trial. The lower court further found that Mercer’s interest was protected by the Riley’s screening process, which kept Ford segregated from the litigation and protected confidential information.

The New Mexico Supreme Court, however, decided that the Riley firm must be disqualified from the case. Following the lead of courts in Arizona, Colorado, Massachusetts, Nevada and Ohio, the court set a bright-line standard for imputed conflicts of interests under these circumstances:

[W]e hold that when an attorney has played a substantial role on one side of a lawsuit and subsequently joins a law firm on the opposing side of that lawsuit, both the lawyer and the new firm are disqualified from any further representation, absent informed consent of the former client. We also specifically conclude under the same rule that screening the new attorney from any involvement in the lawsuit is not an adequate response to the conflict.

The court explained that screening only comes into play when the new hire had a minimal connection with the case in her prior employment:

In other words, a firm may continue to represent a current client, if the newly-hired associate had only limited or peripheral involvement in the matter, and an effective screening process is in place. Importantly, screening can only avoid the firm’s disqualification if the disqualified associate played no “substantial role” in the matter before changing firms.