If a Texas firm hires a non-lawyer employee (like a marketing assistant) who used to work for the opposing party's firm, must the firm withdraw, and must it screen the employee?

Plain-English summary

The opinion considers Firm A (representing the plaintiff) hiring a marketing assistant who previously worked as a marketing assistant at Firm B (representing the defendant in the same pending lawsuit). Firm A asks whether it must withdraw and whether it must screen the new employee.

The opinion analyzes the situation under Rule 5.03 (responsibilities regarding nonlawyer assistants), read with Rule 1.05 (confidentiality) and Rule 1.09 (former-client conflicts). It concludes a firm is not automatically barred from a representation merely because it hires a non-lawyer who formerly worked for the adverse party's firm, but the firm may be barred from continuing if it fails to take reasonable steps to protect the adverse party's confidential information. Under Rule 5.03, Firm A must train its non-lawyer personnel to protect confidences of the former employer's clients; its lawyers could be disciplined if they order, encourage, or permit disclosure or use of such confidential information, or fail to take remedial action. If actual disclosure or use occurs, Rule 1.06(b)(2) may require Firm A to withdraw.

The opinion then distinguishes discipline from court disqualification. Even absent actual disclosure, a court could disqualify the firm, because the Texas rules are guidelines, not controlling standards, in disqualification decisions (citing In re NITLA and In re de Brittingham). Under Texas Supreme Court cases (In re Guaranty Insurance Services, In re Columbia Valley Healthcare System, Grant v. Thirteenth Court of Appeals, Phoenix Founders v. Marshall), when a non-lawyer worked on a matter there is a conclusive presumption the non-lawyer received the client's confidential information, but only a rebuttable presumption that the non-lawyer shared it with the new firm, which appropriate screening can overcome. For a lawyer who changes firms, by contrast, that second presumption is conclusive and screening will not avoid disqualification.

The opinion concludes that the employee's job title is not determinative; the critical question is whether the employee worked on the matter or otherwise had access to information about Firm B's representation of the defendant. If so, Firm A must use appropriate screening to avoid disqualification; if not, no presumption arises and screening is unnecessary. A firm that decides not to screen based on the employee's duties and statements takes the risk of later disqualification if the facts prove otherwise.

In practice

Under this opinion, and under the Texas rules as they stood in 2015, the analysis turns on whether the hired non-lawyer worked on or had access to information about the adverse party's matter. The opinion holds that Rule 5.03 requires the firm to manage and train the employee to protect the former employer's client confidences, that withdrawal is required only if the employee actually discloses or uses the confidential information (or if the firm fails to screen an employee who had access), and that screening can cure a non-lawyer's imputed knowledge even though it cannot for a lawyer who changes firms. The opinion also notes a court may disqualify a firm under standards different from the disciplinary rules.

Common questions

Q: Does a Texas firm have to withdraw if it hires a non-lawyer from the opposing firm?

A: Per Opinion 650, not automatically; withdrawal is required if the employee had worked on or had access to the matter and the firm fails to screen, or if the employee actually discloses or uses the adverse party's confidential information.

Q: Can screening a non-lawyer prevent disqualification?

A: Yes. The opinion explains that for a non-lawyer the presumption of sharing confidences is rebuttable and appropriate screening can overcome it, unlike for a lawyer who moves firms, where the presumption is conclusive.

Q: Does the employee's job title decide the issue?

A: No. The opinion concludes the title is not determinative; the critical issue is whether the employee worked on the matter or had access to information about the former firm's representation of the adverse party.

Q: Can a court still disqualify the firm even if it followed the rules?

A: Yes. The opinion notes disqualification is decided by courts under standards not necessarily identical to the disciplinary rules, so a firm could be disqualified even if it complied with the rules.

Background and rules framework

The opinion interprets Rule 5.03 (responsibilities regarding nonlawyer assistants), Rule 1.05 (confidentiality of information), Rule 1.09 (former-client conflicts), and Rule 1.06(b)(2) (representation adversely limited by responsibilities to a third person or the lawyer's own interests). In the ABA Model Rules, the nonlawyer-assistant supervision duty corresponds to Model Rule 5.3, the imputation principles to Model Rule 1.10, and the confidentiality duty to Model Rule 1.6.

Citations and references

Rules of Professional Conduct:

• MR 5.3 (responsibilities regarding nonlawyer assistants)
• MR 1.10 (imputation of conflicts)
• MR 1.6 (confidentiality of information)
• Texas Disciplinary Rules 5.03, 1.05, 1.09, 1.06(b)(2)

Cases:

• In re Guaranty Insurance Services, Inc., 343 S.W.3d 130 (Tex. 2011)
• In re Columbia Valley Healthcare System, L.P., 320 S.W.3d 819 (Tex. 2010)
• Grant v. Thirteenth Court of Appeals, 888 S.W.2d 466 (Tex. 1994)
• Phoenix Founders, Inc. v. Marshall, 887 S.W.2d 831 (Tex. 1994)
• In re NITLA S.A. de C.V., 92 S.W.3d 419 (Tex. 2002)
• Henderson v. Floyd, 891 S.W.2d 252 (Tex. 1995)

Other opinions cited:

• Texas Professional Ethics Committee Opinions 472 (June 1991), 644 (August 2014), 598 (July 2010), 578 (July 2007)

See also

• TX Ethics Op. 693: Migrating Lawyer Conflicts and Rule 1.10 Screening
• ABA Formal Op. 510: Avoiding Imputation of a Prospective-Client Conflict

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-650/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_650.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

QUESTION PRESENTED

Must a law firm withdraw from representing a client in a lawsuit when the law firm hires an employee who is not a lawyer, paralegal or secretary but who was previously employed by the law firm that represents the opposing party in the lawsuit?

STATEMENT OF FACTS

Firm A is a law firm representing the plaintiff, and Firm B is a law firm representing the defendant in a lawsuit. While the lawsuit is pending, Firm A hires a marketing assistant who had been previously employed as a marketing assistant at Firm B. Firm A seeks to determine whether it must withdraw from representing the plaintiff in the lawsuit, and if not, whether it must utilize screening procedures to prevent the new employee from being involved in the representation of the plaintiff and from sharing confidential information concerning the defendant with anyone in Firm A.

DISCUSSION

Because the factual situation considered here involves a law firm's nonlawyer employee, the requirements of Rule 5.03 of the Texas Disciplinary Rules of Professional Conduct, entitled "Responsibilities Regarding Nonlawyer Assistants," must be considered. Rule 5.03 provides in full as follows:

"With respect to a nonlawyer employed or retained by or associated with a lawyer:

(a) a lawyer having direct supervisory authority over the nonlawyer shall make reasonable efforts to ensure that the person's conduct is compatible with the professional obligations of the lawyer; and

(b) a lawyer shall be subject to discipline for the conduct of such a person that would be a violation of these rules if engaged in by a lawyer if:

(1) the lawyer orders, encourages, or permits the conduct involved; or

(2) the lawyer:

(i) is a partner in the law firm in which the person is employed, retained by, or associated with; or is the general counsel of a government agency's legal department in which the person is employed, retained by or associated with; or has direct supervisory authority over such person; and

(ii) with knowledge of such misconduct by the nonlawyer knowingly fails to take reasonable remedial action to avoid or mitigate the consequences of that person's misconduct."

In the circumstances here considered, Firm A and its lawyers are required by Rule 5.03 to employ the newly hired marketing assistant in a way that avoids conduct that, if by a lawyer, would violate other provisions of the Texas Disciplinary Rules of Professional Conduct. Rules of particular concern here are Rule 1.05, requiring protection of confidential client information, and Rule 1.09, prohibiting certain representations adverse to a lawyer's former client. Taken as a whole, these rules require a law firm to manage nonlawyer employees so that confidential information of clients of a nonlawyer's former law firm employer is protected from unauthorized disclosure or use against the clients of the former law firm. A law firm is not automatically barred from representation in a lawsuit because the firm employs a nonlawyer who formerly worked for another law firm while that firm was representing an adverse party in the lawsuit. However, the employing law firm may be prohibited from continuing the representation if it fails to take reasonable steps to protect confidential information concerning the adverse party that may be in the possession of the new nonlawyer employee. See Professional Ethics Committee Opinion 472 (June 1991) (concerning employment of a secretary or legal assistant). Also see the discussion regarding nonlawyer employees in Opinion 644 (August 2014) (concerning a newly hired lawyer who before becoming a lawyer worked as a law clerk for another law firm in its representation of a party in a lawsuit in which the new lawyer's current employer represents the opposing party).

In this case, Rule 5.03 requires that the lawyers in Firm A make reasonable efforts to ensure that their nonlawyer personnel receive sufficient training so that they understand and act consistently with the obligations of the firm and its lawyers with respect to protecting the confidential information of clients of a nonlawyer employee's former law firm employer. The lawyers in Firm A could be subject to discipline if the newly hired marketing assistant has confidential information concerning the defendant and the law firm orders, encourages or permits the new employee to disclose or use such confidential information to the disadvantage of the defendant or if the firm fails to take reasonable remedial action after learning of the disclosure or use of such confidential information. In the event of a disclosure or use of such confidential information, Rule 1.06(b)(2) may also require Firm A to withdraw from representing the plaintiff because its continuing representation in the lawsuit may reasonably appear to be adversely limited by the lawyers' or law firm's responsibilities to a third person, namely the defendant, or by the lawyer's or law firm's own interests.

In the absence of an actual disclosure or use by the marketing assistant of confidential information acquired prior to employment, the lawyers in Firm A generally would not be subject to discipline under the Texas Disciplinary Rules. However, even if there is no actual disclosure or use of confidential information, Firm A could be subject to disqualification by a court. Although courts often look to the Texas Disciplinary Rules of Professional Conduct in deciding disqualification issues, the Texas Disciplinary Rules are merely guidelines, rather than controlling standards, in judicial decisions on disqualification. See, e.g. In re NITLA S.A. de C.V., 92 S.W.3d 419, 422 (Tex. 2002); In re de Brittingham, 319 S.W.3d 95, 98 (Tex. App.-San Antonio 2010, orig. proc.). In Texas courts, if a member of Firm B's staff, such as a secretary or paralegal, worked on the matter involving the defendant in the lawsuit and then left Firm B to go to work for Firm A, to avoid disqualification, Firm A must put in place adequate screening procedures for the purpose of preventing the newly hired employee from disclosing or using the defendant's confidential information. In re Guaranty Insurance Services, Inc., 343 S.W.3d 130 (Tex. 2011); In re Columbia Valley Healthcare System, L.P., 320 S.W.3d 819 (Tex. 2010); Grant v. Thirteenth Court of Appeals, 888 S.W.2d 466 (Tex. 1994); Phoenix Founders, Inc. v. Marshall, 887 S.W.2d 831 (Tex. 1994). These decisions all recognize that when a lawyer or a staff member of a law firm works on a matter for a client, there is a conclusive presumption that confidential information of the client is imparted to the lawyer or staff member. This conclusive presumption prevents the client from being required to reveal the confidential information as part of a disqualification action. In these decisions, there is also a second presumption that the nonlawyer employee shares the client's confidential information with the lawyers in his or her new firm, but that presumption is not conclusive and can be overcome by the implementation of appropriate screening procedures. In contrast, in the case of a lawyer moving from one firm to another the second presumption is conclusive and screening will not avoid the disqualification of the law firm. See Professional Ethics Committee Opinions 598 (July 2010) and 578 (July 2007); Henderson v. Floyd, 891 S.W.2d 252, 254 (Tex. 1995). Compare Opinion 644 (August 2014) (screening not effective in the case of a newly hired lawyer who before becoming a lawyer worked as a law clerk for another law firm in its representation of a party in a lawsuit in which the new lawyer's current employer represents the opposing party).

In this case, if Firm A utilizes appropriate screening procedures designed to prevent the newly hired employee from revealing or using confidential information of the defendant to the detriment of the defendant, Firm A does not need to consider withdrawing from representation of the plaintiff in the lawsuit unless the newly hired employee actually reveals confidential information of the defendant to someone else in Firm A or actually works on the lawsuit. See In re Guaranty Insurance Services, Inc., 343 S.W.3d 130 (Tex. 2011).

The one remaining question is whether Firm A is required to utilize appropriate screening procedures with respect to the newly hired marketing assistant to avoid being disqualified from representing the plaintiff in the lawsuit. The facts considered in this opinion are that the employee worked as a marketing assistant both for Firm B and then for Firm A. The position or duties of the employee, however, are not determinative. The critical issue is whether the employee worked on the matter in which Firm B was representing the defendant in the lawsuit or otherwise had access to information relating to Firm B's representation of the defendant. If not, there is no presumption, conclusive or otherwise, that confidential information of the defendant was imparted to the employee while working at Firm B. In re Columbia Valley Healthcare System, L.P., 320 S.W.3d 819, 828 (Tex. 2010) ("We finally note that these requirements apply only to nonlawyer employees who have access to material information relating to the representation of clients . . . ."). However, if the employee had worked on the matter in which Firm B was representing the defendant in the lawsuit or otherwise had access to information relating to Firm B's representation of the defendant, it would be necessary for Firm A to utilize appropriate screening procedures in order to avoid disqualification. On the other hand, screening procedures would not be necessary if Firm A could determine, perhaps in part based on the marketing assistant's duties at Firm B and in part based on the employee's statements to the firm, that the employee had not worked on the matter in which Firm B was representing the defendant in the lawsuit and did not otherwise have access to information relating to Firm B's representation of the defendant. In making a decision not to implement screening procedures, Firm A would be taking a risk that could result in the firm later being disqualified from representation of the plaintiff in the lawsuit. If the facts turn out to be otherwise than Firm A believes and the new employee did in fact work on the matter in which Firm B was representing the defendant in the lawsuit or otherwise had access to information relating to Firm B's representation of the defendant, Firm A could be disqualified from representing the plaintiff in the lawsuit because of the failure to implement screening procedures. Reliance on the employee's statements to the contrary would not change that result. Firm A can best avoid this risk by utilizing appropriate screening procedures with respect to the newly hired marketing assistant.

CONCLUSION

Under the Texas Disciplinary Rules of Professional Conduct, a law firm representing a party in a lawsuit that hires an employee who is not a lawyer, paralegal or secretary but who was previously employed by the law firm that represents the opposing party in the lawsuit may in some circumstances be required to withdraw from the representation. The hiring law firm will be required to withdraw from the representation if the employee in question had in the prior employment worked on the lawsuit or otherwise had access to information concerning the prior employer's representation of the opposing party in the lawsuit and the hiring law firm fails to take effective steps, which normally would include screening the newly hired employee, to prevent the employee from disclosing or using in the hiring law firm confidential information related to the lawsuit. In all other circumstances, the hiring law firm will not be required to withdraw from the representation unless, regardless of the hiring law firm's attempts to prevent improper disclosure or use of any confidential information relating to the lawsuit acquired by the employee in the prior law firm, the employee actually discloses or uses such confidential information in the hiring law firm. Because issues of disqualification are determined by the courts based on standards that are not necessarily identical with the requirements of the Texas Disciplinary Rules of Professional Conduct, in some circumstances a law firm may be held to be disqualified from a representation even if there has been full compliance by the law firm with the requirements of the Texas Disciplinary Rules concerning successive employment of non-lawyer employees.

Tex. Comm. On Professional Ethics, Op. 650 (2015)