Law Firm’s Advance Conflict Waiver Upheld
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A corporate client who signs a law firm’s open-ended advance conflicts of interest waiver gives “informed consent” for the firm’s future representation of adverse clients if the waiver adequately informs the client of material risks and reasonable alternatives and if the client is sophisticated enough to understand the waiver, according to a recent decision from the U.S. District Court for the Northern District of Texas. Factors for determining sophistication include the client’s size, legal experience, and whether independent counsel represents the client.
From Advance Waiver to Motion to Disqualify
In the case at issue [PDF], global skin-care company Galderma retained a large law firm in 2003 to handle employment-related legal issues. As part of that representation, Galderma’s general counsel signed an agreement to waive conflicts of interest between Galderma and the firm’s future clients. The waiver stated that the firm could represent clients with interests adverse to Galderma in unrelated matters that would not reveal confidential information to Galderma’s detriment, agreed that the other clients’ interests might conflict with Galderma’s, and noted that Galderma could retain other counsel.
“For large law firms to be able to take on a wide range of clients, they believe that they need to have advance waivers,” explains Merri A. Baldwin, San Francisco, cochair of the Attorneys’ Liability Subcommittee of the ABA Section of Litigation’s Professional Liability Litigation Committee. “The reason why is that many large clients, as in this case, are using multiple law firms, and the potential for conflicts has expanded.”
In 2012, almost 10 years after Galderma signed the firm’s waiver, the firm still represented the company in employment matters. Using different counsel, Galderma filed an intellectual property suit against drug manufacturer Actavis. When Actavis served its answer, Galderma learned that the firm was serving as Actavis’s counsel. Galderma asked the firm to withdraw. After the firm decided to end its relationship with Galderma instead, Galderma brought a motion to disqualify the firm from representing Actavis.
“This case just seemed like vengeance,” remarks Bruce A. Rubin, Portland, OR, cochair of the Legal Ethics Subcommittee of the Section of Litigation’s Corporate Counsel Committee. “There’s absolutely nothing to suggest that [the firm] would use confidential information. It wasn’t necessary for [the firm] to resign.”
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