This is the sixth of a series of articles, based on a chapter from the 2015 edition of Lawyers’ Professional Responsibility in Colorado by attorney Michael T. Mihm, discussing the current law of conflicts of interest as it applies to Colorado lawyers. It draws upon the Colorado Rules of Professional Conduct; the former Colorado Rules of Professional Conduct, effective through December 31, 2007 (former Colorado Rules or former Colo. RPC); Colorado appellate decisions; ethics opinions; the ABA Model Rules of Professional Conduct; the Restatement (Third) of the Law Governing Lawyers (Restatement); and other resources.
Lawyers often encounter potential conflicts of interest with former clients. The general rule is that a lawyer may not represent a new client who is materially adverse to a former client when the subject of the representation is “substantially related” to the lawyer’s prior representation. The primary purpose of the “substantial relationship” test is to protect the secrets and confidences of the former client to which the lawyer was privy. In other words, the former client should not be disadvantaged because of his or her lawyer’s new representation. Recent supreme court decisions have also focused on what constitutes a current client being “materially adverse” to the interests of the former client and provided guidance on what constitutes materially adversity.
Colo. RPC 1.9 sets out the “substantial relationship” test:
- A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.
- A lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client
- whose interests are materially adverse to that person; and
- about whom the lawyer had acquired information protected by Rule 1.6 and 1.9(c) that is material to the matter; unless the former client gives informed consent, confirmed in writing.
- A lawyer who has formerly represented a client in a matter and whose present or former firm has formerly represented a client in a matter shall not thereafter:
- use information relating to the representation to the disadvantage of the former client except as these Rules would permit or require with respect to a client, or when the information has become generally known; or
- reveal information relating to the representation except as these Rules would permit or require with respect to a client.
Comment  to Colo. RPC 1.9 states uncategorically “[a]fter termination of a client-lawyer relationship, a lawyer has certain continuing duties with respect to confidentiality and conflicts of interest and thus may not represent another client except in conformity with this Rule.” (Emphasis added). The Comment states, by way of example:
Under this Rule, for example, a lawyer could not properly seek to rescind on behalf of a new client a contract drafted on behalf of the former client. So also a lawyer who has prosecuted an accused person could not properly represent the accused in a subsequent civil action against the government concerning the same transaction.
The “substantial relationship” test turns on whether the former and present representations are substantially related, so that confidences received during the first representation will not be imparted to the former client’s detriment during the second representation. Colo. RPC 1.9, cmt. ; ABA Model Rules 1.9, cmt. .
The Restatement also relies on the substantial relationship test:
§ 132. A Representation Adverse to the Interests of a Former Client.
Unless both the affected present and former clients consent to the representation under the limitations and conditions provided in § 122, a lawyer who has represented a client in a matter may not thereafter represent another client in the same or a substantially related matter in which the interests of the former client are materially adverse. The current matter is substantially related to the earlier matter if:
- the current matter involves the work the lawyer performed for the former client; or
- there is the substantial risk that the representation of the present client will involve the use of the information acquired in the course of representing the former client, unless that information has become generally known.
The Colorado courts have mostly addressed the substantial relationship test in the context of motions to disqualify. See, e.g., People v. Hoskins, 333 P.3d 828 (Colo. 2014); English Feedlot, Inc. v. Norden Labs., Inc., 833 F. Supp. 1498 (D. Colo. 1993); Funplex P’ship v. F.D.I.C., 19 F. Supp. 2d 1202 (D. Colo. 1998); F.D.I.C. v. Sierra Res., Inc., 682 F. Supp. 1267 (D. Colo. 1987); Cole v. Ruidoso Mun. Sch., 43 F.3d 1473 (10th Cir. 1994). The party seeking disqualification under Colo. RPC 1.9 must provide the court with specific facts to show that disqualification is necessary, and he or she cannot rely on speculation or conjecture. Hoskins, 333 P.3d at 836; Funplex P’ship, 19 F. Supp. 2d at 1206. Specifically, the moving party must show that (1) a client-lawyer relationship existed in the past; (2) the present litigation involves a matter that is substantially related to the prior litigation; (3) the present client’s interests are materially adverse to the former client’s interests; and (4) the former client has not consented to the disputed representation after consultation. Hoskins, 333 P.3d at 835, citing Funplex P’ship, 19 F. Supp. 2d at 1206.
In Crystal Homes v. Radetsky, 895 P.2d 1179 (Colo. App. 1995), a legal malpractice case, the Colorado Court of Appeals stated that a lawyer is not always precluded from representing a client in a transaction with a former or currently inactive client. Id. at 1182; see also In re King Res. Co., 20 B.R. 191 (D. Colo. 1982). Whether a lawyer properly may do so depends upon the nature and extent of the former legal work performed for the previous client, as well as the possible relationship between the two transactions. Radetsky, 895 P.2d at 1182; see also Code of Professional Responsibility DR 5-105(3).
In People v. Frisco, 119 P.3d 1093 (Colo. 2005), the Colorado Supreme Court analyzed the issue of what facts a trial court must consider when determining whether there was a “substantial relationship” between a criminal defense lawyer’s representation of a former client and the lawyer’s representation of a current client when the former client was a prosecution witness against the current client.
In Frisco, the criminal defense lawyer had represented the prosecution witness, Mangeris, against charges of manufacturing and conspiring with a third person over a three-day period to manufacture and distribute methamphetamine. The lawyer’s representation largely consisted of arranging for Mangeris’s continued release on bond. When Mangeris failed to appear at a hearing, his bond was revoked and he was arrested. At that point, other defense counsel began representing Mangeris and the first lawyer withdrew.
As part of a broader plea agreement, the drug charges on which the lawyer had represented Mangeris were dismissed, and Mangeris became a prosecution witness. As part of his grand jury testimony, Mangeris testified against Frisco about crimes unrelated to the charges against Mangeris, but also involving the distribution of methamphetamine. Moreover, Mangeris testified that he supplied Frisco with product, methamphetamine, and to pay Mangeris, Frisco supplied the funds used to obtain Mangeris’s release bond. (There was no allegation that Mangeris’s lawyer knew anything of the arrangement.)
A grand jury indicted Frisco on numerous charges. Frisco retained Mangeris’s former lawyer. The district attorney moved to disqualify Frisco’s lawyer pursuant to the former Colo. RPC 1.9(a), arguing that because the lawyer had previously represented Mangeris, and because the lawyer’s prior representation of Mangeris was substantially related to the lawyer’s current representation of Frisco, and the lawyer had not obtained a waiver from Mangeris, the lawyer had a conflict of interest that required disqualification. The district court agreed, ruling only that Colo. RPC 1.9(a) imposed a duty on the lawyer to obtain the consent of his former client, Mangeris, before representing Frisco, and disqualified the lawyer. The trial court found that the lawyer’s representation of Frisco was substantially related to the lawyer’s representation of Mangeris because both representations involved controlled substances and because of the “facts and circumstances” that would be at issue in Frisco’s case.
Frisco filed a C.A.R. 21 petition. The supreme court issued a rule to show cause why the trial court’s decision to disqualify the lawyer should not be reversed. In its decision, the court discussed the analysis that the trial court must conduct to determine whether a lawyer’s representation is substantially related to another representation. In reversing the decision of the district court, the supreme court made the rule absolute.
The supreme court held that it was unreasonable to find a substantial risk that confidential information as would normally have been obtained by counsel in the prior representation would materially advance the current client’s interests, based upon the existing record. The court discussed what the trial court must consider in analyzing whether two matters are substantially related:
The [former Colo. RPC 1.9(a)] obviously does not require the consent of a former client to all future representation but only to the representation of “another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client.” Because the use of information from a prior representation to the disadvantage of the former client is separately restricted by [former] Rule 1.9(c), Rule 1.9(a) applies only to situations involving an inherent and substantial risk of violating an attorney’s duty of loyalty to former clients. Its prohibition is therefore limited to representations that combine the same or substantially related legal disputes with a motive to harm a former client, in order to advance the interests of a current client.
Unless both matters involve the same transaction or legal dispute, they are considered “substantially related” only if there is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client’s position in the subsequent matter. See Model Rules of Professional Conduct Rule 1.9 cmt. 3 (2002); see also Analytica, Inc. v. NPD Research, Inc., 708 F.2d 1263, 1266 (7th Cir. 1983); Koch v. Koch Indus., 798 F. Supp. 1525, 1536 (D. Kan. 1992); see generally Restatement (Third) of the Law Governing Lawyers § 132 cmt. d(iii) (2000). Any meaningful assessment of this risk cannot be limited to the consideration of ultimate legal issues, but must account for facts and circumstances, legal theories and strategies, and even the nature and scope of the attorney’s involvement in the former representation.
Although there appears to be no clear consensus about precisely how the “substantial relationship” test should be applied without simultaneously exposing the very matters to be protected, see generally ABA/BNA Lawyers’ Manual on Professional Conduct 51:2203-25 (2002), assessing whether the two representations are “substantially related” has been described as a process of factual reconstruction, see Westinghouse Elec. Corp. v. Gulf Oil Corp., 588 F.2d 221, 225 (7th Cir. 1978); see generally Charles W. Woofram, Symposium: Restatement of the Law Governing Lawyers, 10 Geo. J. Legal Ethics 677 (Summer 1997). It necessarily entails some consideration of the likelihood that the attorney would have been exposed to confidential client information relevant to the prior matter, as well as the likelihood that such confidential material will be relevant to the later representation. Westinghouse, 588 F.2d at 225. Unless both cases involve an identical legal dispute or the same factual events, making it obvious that matters relevant to both would normally have been discussed in the earlier representation, evaluating the relationship between the representations will therefore generally require some factual inquiry and the identification of confidential factual information that would normally be obtained in the former representation and disadvantage the former client in the current representation.
Current clients are protected from conflicts of interest by other provisions of the rules. See, e.g., C.R.P.C. 1.7 (Conflict of Interest: General Rule) and 1.8 (Conflict of Interest: Prohibited Transactions). And courts clearly have the responsibility to ensure that a criminal defendant receives a fair trial (even where that requires disqualification of his counsel of choice), as well as the latitude to ensure the integrity, and appearance of integrity, of the process. With regard to Rule 1.9(a)’s specific protection of the interests of former clients, however, adversity of interests between former and current clients, standing alone, is insufficient to justify disqualification of counsel. The sweeping disqualification remedy of C.R.P.C. 1.9(a) applies only upon the identification of confidential factual information that would normally have been obtained in a former representation and would also materially advance the adverse interest of a client in a subsequent matter. Id. at 1096.
The supreme court observed that the lawyer’s prior representation of Mangeris did not involve the same crimes with which Frisco was charged, or even crimes allegedly committed in coordination with or at the direction of Frisco, and the facts pertaining to Frisco’s involvement in other crimes were not the type that Mangeris would have normally disclosed to his lawyer. Id. at 1098.
More recently, in People v. Hoskins, 333 P.3d 828 (Colo. 2014), the supreme court focused on what constituted material adversity as part of the Rule 1.9 analysis. The court reversed a trial court decision disqualifying criminal defense counsel because of a conflict of interest, holding that there was insufficient evidence in the record to support the trial court’s finding that the interests of the petitioner, the individual defendant, and the company that the petitioner owned were adverse in the criminal proceeding. Id., at 830. The court focused the heart of its analysis on whether, for purposes of Colo. RPC 1.9(a), the petitioner’s interests were “materially adverse” to the company’s interests such that the petitioner’s lawyers should be disqualified and, specifically, what motive the petitioner would have to use confidential information to hurt the company. The court pointed to the absence of specific facts, beyond speculation, showing a “clear danger of prejudice or a motive to harm [the company] or order to advance [the petitioner’s] interests in [the] criminal case.” Id. The court pointed out that the appellate record showed that the petitioner was the sole senior manager of the company at the periods in question, as thus the sole “high managerial agent” responsible for the company’s conduct. Thus, in the criminal case, to the extent the petitioner attempted to shift blame from himself to the company, he would be pointing the finger at himself and he had no motive to do so. Id., at 837. Moreover, even if the petitioner attempted to shift the blame, the problem could be resolved by severing the trials of the petitioner and the company. Given the petitioner’s strong Sixth Amendment guarantee to be represented by counsel of his choosing, the court found that such Sixth Amendment rights were paramount, and that the attorney general had not met his burden to show that, for purposes of Colo. RPC 1.9(a), the interests of the petitioner were materially adverse to the interests of the company.