WDTL Ethics Seminar Recap
Sunday, February 18, 2018
by: Christopher Howard

Section: Winter 2018

Author Bio

Christopher Howard is a Shareholder at Schwabe, Williamson & Wyatt and serves on the WDTL Pro Bono Committee. He focuses his practice on commercial litigation, the Food and Beverages and Hospitality Industries, and the defense of professionals in the medical, legal, financial, hospitality and real estate industries. He has extensive trial and appellate experience in state, federal and administrative law courts.
This article recaps some of the highlights of WDTL’s annual ethics seminar held on November 30, 2017. And, judging by the active participation, there were highlights indeed.

Former WSBA President Mark Johnson presented on what gets lawyers in trouble, from disciplinary actions to disqualification.  Mark covered many statistics from state and national sources about the causes of lawsuits and grievances. Twenty-five percent of the claims filed are still caused by missed deadlines, a problem across all practice areas. However, the hottest topic of discussion came when his presentation touched on recent case law regarding law firm disqualification from representing corporate affiliates.

The issue of whether to run corporate affiliates in conflict checks is debated in many law firms.  The part of this presentation with the most discussion related to recent cases, and specifically the unreported Federal opinion of Atlantic Specialty Insurance Company v. Premera Blue Cross, 2016 WL 161543, disqualifying a law firm from a coverage suit because another office of the firm had represented a related company. 

In the Atlantic Specialty case, one law firm had been representing a separate corporate entity in an unrelated coverage matter. Lawyers in a different office apparently did not run all affiliates in their conflict check before being adverse to a different affiliate in a coverage matter. The insurance companies in question were administered by the same legal staff. The same in-house lawyer for the insurance carrier was involved in both matters. When the insurance company objected, the law firm first protested there was no conflict and then withdrew from representation of the carrier in the first matter.

Dissatisfied with the “hot potato” approach, the insurance carrier moved to disqualify the law firm from the adverse insurance coverage matter. In its briefing, and at oral argument, the law firm maintained that it had done nothing wrong in failing to pick up the conflict and that it was, in effect, the client’s fault. This did not go over well with the magistrate judge who commented on that tactic as “distasteful” in the order disqualifying the law firm.
The bottom line: It may be necessary to consider affiliates in conflict searches, especially where the corporate entities are closely related and administered by common personnel with a common purpose, as may be the case in certain “families” of insurance companies. This is an unreported opinion, but has been picked up widely, including in an ABA advisory.

Overall we had a very lively WDTL ethics seminar with great audience participation. We look forward to seeing you there next year.

Next, Former WDTL Associate of the Year Colin Folawn presented on confidentiality and several practical issues related to maintaining client confidentiality in the real world.  The portion of this presentation regarding sharing of depositions and other case materials generated a lot of discussion.

The question of sharing depositions was recently addressed in Colorado Formal Ethics Opinion 130 (2017).  In that opinion, the Colorado Bar noted that RPC 1.6 is implicated when a lawyer obtains a deposition or other material related to a case.  This is separate and apart from any medical confidentiality or privileged information that might be contained in the deposition.  They further noted that “[t]here is no exception for revealing information for educational purposes, to assist another lawyer, or because the information is ‘newsworthy.’” Colorado Formal Ethics Opinion 130. Similarly, the opinion stressed there is no exception for disclosing information that might also be available in public records or that is otherwise publically available. Id.

The Colorado opinion is based upon an RPC 1.6 that is virtually identical to Washington’s.  Remember, confidentiality is no longer defined in terms of confidences and secrets.  Confidentiality is defined as information related to the representation.  That is about as broad as a definition could be.  This protection continues for former clients under RPC 1.9, although that rule does have an “information has become generally known” exception in RPC 1.9 (c)(1).

There are exceptions to RPC 1.6, and the easiest is obtaining the client’s informed consent to the use of the information. Some firms have considered putting such consent provisions in their engagement letters, but recall that prospective consents are only as good as the information available to the client at the time the consent is given.  It would be safer to address this issue either when the need arises, if during a case, or when closing a file as part of the file closing process.  Raising the issue with a client at that time, documented in the closing letter, would make sharing of depositions more compliant with RPC 1.6.

The final presentation was a conflicts update, presented by this author, which included an update on recent cases that may have a direct impact on many WDTL members’ practices.

The most interactive part of this presentation was the case update covering the Arden case.  You may recall that the Arden case (Arden v. Forsberg & Umlauf, et al., 189 Wn 2d 315, 402 P.3d 245 (2017), addressed several issues relating to the relationship between an insurance defense firm and the insurance company paying its bill. The Arden case arose out of a lawsuit against an insured being sued for shooting his neighbor’s dog. The carrier initially declined coverage but, after the insured got personal counsel, provided coverage under a reservation of rights. The law firm handling the defense kept the insured and personal counsel fully in the loop for settlement discussions and had their agreement and cooperation in the strategy for negotiations. When the case failed to settle before criminal charges were brought against the insured, he sued the carrier for bad faith and the law firm for malpractice and breach of fiduciary duty. The carrier ultimately managed to settle the underlying case and to settle the bad faith case. The insured proceeded with the action against the law firm.

Arden’s breach of fiduciary duty claims were premised on an alleged failure to disclose that the firm had represented the insurer in first party coverage matters, although there was no evidence in the case that there was a concurrent matter open, and a failure to disclose the “close relationship” between the law firm and the insurance carrier. Arden sought disgorgement of fees (paid by the insurance carrier) and emotional distress damages. The Court of Appeals found no concurrent conflict and that the engagement was consistent with Tank and affirmed the trial court’s summary judgment in favor of the law firm. Arden v. Forsberg & Umlauf, 193 Wn. App. 731 (2016).

The Supreme Court also affirmed, but on a different analysis. The court revisited Tank v State Farm, 105 Wn. 2d 381, 715 P.2d 1133 (1988) and distinguished the facts of the Arden case because there was no evidence that the lawyers demonstrated a greater concern for the carrier than for the insured. But the court accepted the concept that the law firm had a duty to disclose the nature of their relationship with the insurance carrier. However, the court went on to find no damages as a matter of law and upheld the dismissal. The court expressed concern about a request for disgorgement of fees that the insured had not paid, the carrier had funded the settlement below, so there were no resultant damages, and the court found no facts to support any other damages theories. While sustaining the dismissal, this opinion arguably leads an insurance defense firm to consider disclosing to each insured the nature and extent of the relationship the firm has with the insurance carrier paying the bill. This can be done as a matter of course as part of the RPC 1.8 (f) consent process. That process historically has not required a written confirmation, but adding this disclosure to it would be one more reason to document it in writing.

Overall we had a very lively WDTL ethics seminar with great audience participation. We look forward to seeing you there next year.

Note: The 2017 Ethics CLE is available to order and download and view at your leisure. 3.0 Ethics CLE credits have been awarded. To order this program, please visit this link.