Wednesday, December 19, 2007

Conflicts Of Interest And Lateral Hires

An opinion of the Appellate Court of Illinois, First District, First Division, addresses some of the most significant issues that law firms face in the conflict of interest consequences of hiring lateral lawyers. The incoming lawyer had brought two cases to the firm in which condominium owers sued their property developer and associated persons for "unrepaired common elements and inadequate capital reserves." The defendants sought and were granted disqualification as another attorney in the firm "was already representing corporations that were or are managed by the individual defendants" and that the representation thus violated Rule 1.7. The plaintiffs appealed the disqualification order.

The court held that the trial court did not abuse its discretion. The trial court found that the law firm "was in a long-term, significant relationship with the [individual defendant's] corporations and was actively representing some of those corporations concurrently or after [the law firm] substituted as counsel in the [present] action." Screening, which the firm had employed, did not solve the problem. The court further rejected the plaintiffs' suggestion that the representation had ceased and that the defendant's had waived their objection by not raising it in a timely manner.

The court concluded:

    "The particular circumstances of this case indicate [the law firm] was engaged by and reports to a management group that runs parent, subsidiary, and affiliated corporations that own, manage, and develop residential condominium properties in Chicago. The particular circumstances of this case would lead the management group and the...corporations to reasonably believe that they were [the law firm's] existing clients... Significantly, there is no indication that [the law firm] took any affirmative actionto inform the [defendant] management group that it was ending their long-term attorney-client relationship..."

The case also discusses the impact of bar ethics opinions on how courts analyze conflicts issues and strikes from the record the plaintiff's statement of facts in its petition for appeal as "argumentative and confusing... the plaintiffs never provide reasoned argument, citation to supporting legal authority, or citation to the pages in the record on appeal indicating they were presenting actual argument in the trial court and thus preserved an issue for appeal."

The chair of the law firm's professional responsibility committee, who had ordered the screen as a solution to the conflicts problem, also served as counsel in this appeal. (Mike Frisch)

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