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Imputed Disqualification: Challenges of Suing Former Clients

The case of RehabCare Group East, Inc. v. Village Health Care Management, LLC demonstrates the importance of thorough and vigorous conflict of interest checks by attorneys to avoid representation overlap. This case illustrated the dangers of suing a former client and led a U.S. district court to disqualify the law firm that had been representing a plaintiff because the firm’s partners had previously represented one of the defendants. Nothing was able to overturn the ruling as neither the partner’s retirement nor screening could not save the representation overlap. A plaintiff suing multiple defendants is what initiated the case due to the alleging breach of contract.

Defendant Disqualifies Plaintiff’s Law Firm

The defendant in the case recognized that its former law firm was the same firm now representing the party suing them. It filed a motion for imputed disqualification on the grounds of representation overlap between the plaintiffs. The defendant even provided the court with extensive proof of email correspondence between the attorney and the defendant. The court examined the emails and found they did not reveal any sensitive or confidential information themselves. However, the case turned in favor of the defendant when it was concluded the emails likely included conversations about negotiation and financial strategies.

During the time the court deliberated the defendant’s disqualification motion, the attorney, who previously represented the defendant and was the focal point of the motion, retired from practicing law. This further fueled the dispute between parties and the proper rule to apply under Rule of Professional Conduct 1.10.

Rule of Professional Conduct

The Rule of Professional Conduct 1.10 has two subsections. Subsection A applies to currently associated lawyers, where subsection B applies to formerly associated lawyers. The district court ruled in favor of the stricter subsection Rule 1.10 A. The court’s main concern was that the defendant had conveyed information concerning negotiation and financial strategies to the primary attorney and that it would likely be relevant to the litigation and negotiation strategy of the current case. The defendant likely imputed this knowledge to the new attorney, therefore disqualifying him for representation overlap.

The court rejected both the argument that the primary attorney’s retirement affected the result and screening as a measure to save the representation. The Illinois federal magistrate judge recommended the attorney be disqualified from representing the therapy provider in its suit against the nursing facility, stating the fact the attorney works at a firm that had previously represented the nursing facility bars him from the litigation.

The Need for Strong Conflict Checks

This case specifically highlights the importance of conflict checks before beginning litigation. Section leaders from the Ethics & Professionalism Committee of the ABA Section of Litigation warn that this is an issue that needs to be explored with the client at the very outset. This case is an example that litigators can look to offensively, not only defensively. It is in the best interest of attorneys and law firms to run robust conflict of interest checks as part of an initial conflicts system. Identifying party information and subject matter descriptions thoroughly enables the lawyer to do a comprehensive conflict check in order to avoid imputed disqualification.

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