• Disqualification Of Counsel And The Substantially Related Matters Test
  • January 3, 2011 | Author: Arthur F. Wheeler
  • Law Firm: Marshall, Dennehey, Warner, Coleman & Goggin - Cherry Hill Office
  • Key Points:

    • Under New Jersey Rule of Professional Conduct 1.9(a) a lawyer who has represented a client in a matter shall not thereafter represent another client in the same or substantially related matter in which that client's interests are materially adverse to the interests of the former client unless the former client gives informed consent confirmed in writing.

    • The New Jersey Supreme Court has held that for purposes of RPC 1.9, matters are substantially related "if (1) the lawyer for whom disqualification is sought received confidential information from a former client that can be used against a client in a subsequent representation of parties adverse to the former client; or (2) facts relevant to the prior representation are relevant and material to the subsequent representation."

    • The evaluation as to whether the matters are the "same or substantially related" must be based in fact. The Court has rejected the appearance of impropriety as a factor to be considered in determining whether a prohibited conflict of interest exists under RPC 1.9.

    The New Jersey Supreme Court's opinion in City of Atlantic City v. Trupos, 201 N.J. 447, 992 A.2d 762 (2010), is the Court's first opinion addressing the question of what may constitute "substantially related matters" that can cause disqualification of counsel from handling a matter since the 2004 revisions of the Rules of Professional Conduct, at which time the Court eliminated the "appearance of impropriety" language.

    In Trupos, an Atlantic City law firm handled a number of real estate tax appeals for the City of Atlantic City in 2006 and 2007. The law firm also served as a non-voting consultant to a City committee responsible for implementing a court order for the re-evaluation of real estate tax assessments. The law firm ended its representation of the City of Atlantic City in most matters by March of 2008. The firm was then retained to represent several hundred taxpayers challenging their 2009 assessments. The City attempted to disqualify the law firm.

    The City was successful in its arguments to the Tax Court, which ruled that the firm would not be permitted to represent the Atlantic City taxpayers in their 2009 appeals. The Tax Court found that the current and former matters were "substantially related" so that the law firm would be disqualified from representation of the taxpayers under RPC 1.9. City of Atlantic City v. Trupos, 25 N.J. Tax 108 (2009).

    While the law firm settled only one case during its period of representation of the City, the Tax Court assumed that the firm must have had the opportunity to discuss settlement litigation strategy with the Mayor, the City Council and the Tax Assessor and that this knowledge gave the law firm insight into the thought processes of its 2008 and 2009 assessments. The Tax Court concluded that the law firm must be disqualified because of the great likelihood that the firm was knowledgeable of relevant confidences of the City's Assessor, the Mayor and Council which could be used against the City.

    The Supreme Court stated that for purposes of RPC 1.9, matters are substantially related "if (1) the lawyer for whom disqualification is sought received confidential information from a former client that can be used against a client in a subsequent representation of parties adverse to the former client; or (2) facts relevant to the prior representation are relevant and material to the subsequent representation." The Supreme Court found that the law firm did not receive confidential information from the City which can be used against the City in the prosecution of the 2009 tax appeals. Thus, the Supreme Court found that the disqualification was unwarranted.

    The Court emphasized that the evaluation as to whether the matters are the "same or substantially related" must be based in fact, noting that the Court has rejected the appearance of impropriety as a factor to be considered in determining whether a prohibited conflict of interest exists under RPC 1.9.

    The Court also provided a survey of other jurisdictions and their determination of the "substantially related matters" test. The District Court for the Eastern District of Pennsylvania has held that matters are "substantially related for purposes of RPC 1.9 if they involve the same transaction or legal dispute, or if there otherwise 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." United States v. Fumo, 504 F. Supp. 2d 6, 28 (E.D. P.A. 2007).

    The Court also cited New York's statement of the test, "Whether facts which were necessary to the first representation are necessary to the present litigation." United States Football League v. National Football League, 605 F. Supp. 1448, 1459 (S.D. N.Y. 1985).

    The Court also provided the New Jersey federal court interpretation that "matters are considered substantially related when it can reasonably be said that in the course of the former representation an attorney might have acquired information related to the subject matter of his or her subsequent representation." Rohm & Haas Co. v. American Cyanamid Co., 187 F. Supp. 2d 221, 228 (D.N.J. 2001).

    This decision highlights not only the need for a thorough conflicts check prior to a firm accepting a new assignment but, further, provides a detailed, factually-based framework for evaluating any potential conflict analysis.