ANALYSIS: Rule 1.9 (substantial relationship test)

NEW RULES OF PROFESSIONAL CONDUCT

Among the new Rules of Professional Conduct set to take effect in November is Rule 1.9, which governs duties to former clients.

At first glance, new Rule 1.9 and current Rule 3-310(E) seem dramatically different. Current Rule 3-310(E) states that a lawyer "shall not, without the informed written consent of the client or former client, accept employment adverse to the client or former client where, by reason of the representation of the client or former client, the [lawyer] has obtained confidential information material to the employment. New Rule 1.9 provides that a lawyer may not represent a person materially adverse to a former client, without the former client's consent, "in the same or a substantially related matter," regardless of whether the lawyer actually obtained confidential information.

In fact, application of the substantial relationship test to former client conflicts is not new. California courts have long applied the substantial relationship test. Where such a relationship is shown, courts will presume that the lawyer obtained confidential information from the former client if "the lawyer was personally involved in providing legal advice and services to the former client." Jessen v. Hartford Cas. Ins. Co., 111 Cal. App. 4th 698, 709, (2003). To decide whether to invoke that presumption, courts examine not only the nature of the lawyer's former involvement but also the similarities between the two factual situations and the legal questions posed. Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft, 69 Cal. App. 4th 223, 234 (1999).

However, the definition of "substantial relationship" will change when the new rules take effect in November, because commentary to the new Rule describes the substantial relationship test differently than does current case law. Case law discussing the substantial relationship test focuses on whether a substantial relationship between the two matters creates a risk that confidential information the lawyer obtained in connection with the first representation might be implicated in the new matter. See, e.g., Flatt v. Superior Court, 9 Cal. 4th 275, 284 (1994) (the "'substantial relationship test' mediates between ... the freedom of the subsequent client to counsel of choice ... and the interest of the former client in ensuring the permanent confidentiality of matters disclosed to the attorney" in the prior representation).

The new definition covers both loyalty to a former client as well as confidentiality. As the commentary explains, the duty of loyalty to a former client prohibits an attorney from doing "anything that will injuriously affect the former client in any matter in which the lawyer represented the former client." New Rule 1.9, cmt. 1 (citing Oasis West Realty, LLC v. Goldman, 51 Cal. 4th 811 (2011), and Wutchumna Water Co. v. Baileyiley, 216 Cal. 564 (1932)); id. cmt 3 ("[t]wo matters are 'the same or substantially related' ... if they involve a *substantial risk of a violation" of the duties of loyalty or confidentiality). This limited duty of loyalty to a former client most often arises when a lawyer seeks to undo something, such as a contract, the lawyer assisted the former client to obtain.

The new rule's definition of "substantial relationship," which differs from the standard ABA definition, is something that will no doubt be explored in appellate opinions going forward.