Private international law implications in conflicts of interest for lawyers licensed in multiple countries.

AuthorSchitka, Barrett

Conflicts of interest issues are one of the most complicated areas of the law that lawyers and law firms face on a day-to-day basis. These issues are further complicated when lawyers are licensed in more than one jurisdiction and become subject to multiple ethical regimes. This article investigates what rules and duties are applicable to lawyers licensed in multiple jurisdictions, and what solutions are available to the lawyer when the law governing lawyers from different jurisdictions diverges or conflicts. Through a discussion of the Canadian and United States rules on conflicts of interest, this article advocates for a two-step "proper law" approach to determine which jurisdiction's ethical rules should be applied.

La question des conflits d'interets est l'un des enjeux juridiques les plus compliques auxquels les avocats et les cabinets sont confrontes au quotidien. Or, cette question se complexifie davantage lorsqu'un avocat est membre de plus d'un barreau, puisqu'il devient concurremment assujetti a plusieurs regimes deontologiques. Cet article examine quels sont les devoirs et regles applicables aux juristes membres de plusieurs barreaux et quelles solutions s'offrent a eux lorsque les differents codes deontologiques auxquels ils sont assujettis divergent ou sont en conflit. En s'appuyant sur une etude des regles ayant trait aux conflits d'interets au Canada et aux Etats-Unis, l'auteur preconise un test de > en deux etapes afin de determiner quel code de deontologie devrait s'appliquer dans une situation donnee.

Introduction I. The Tripartite Conflicts of Interest Problem--Resolving Issues of Jurisdiction and Extraterritoriality A. Motions for Disqualification 1. litigation 2. Transactions B. Disciplinary ' Pi ck codings II. The Multijurisdictional Dilemma for Conflicts of Interest A. Current Clients--Substantial Uniformity B. Past Clients: The Canadian Rule--MacDonald Estate v. Martin C. Past Clients: The U.S. Rules--Imputation and the Onset of AHA Model Rule 1.10 III. The Conflict of Laws Problem and Currently Proposed Solutions A. Uniform Regulation B. Double Deontology C. Existing Choice of Law Rules 1. Choice of Law Rules for Agency 2. Choice of Law Rules for Contract 3. Why Not Use One of These Two Rules? IV. Using the Proper Law Approach to Determine the Applicable Law for Multijurisdictional Disputes Involving the Law Governing Lawyers: A New Framework V. Applying the Choice of Law Framework: Conflicts of Interest Test Case Conclusion Introduction

"[No] area of the law governing lawyers consumes more lawyer time, creates more confusion and frustration, or causes lawyers more difficulty in their practices, than the rules governing conflicts of interest." (1) Yet lawyers inescapably have to address conflicts issues; in recent years the number of law firm mergers, (2) implosions, (3) and lateral hiring of attorneys has dramatically increased. (4) When lawyers join new firms and potentially bring clients or confidential client information with them, conflicts of interest arise and must be resolved. (5) Resolving these issues in the case of a single jurisdiction is no easy task, especially where multiple lawyers are implicated. For example, the recent dissolution of Canadian law firm Heenan Blaikie caused hundreds of partners and associates to look for new firms to join. (6) Those lawyers who choose to join other firms may have limited options of potential firms to join because of conflicts of interest rules. Firms looking to bring in rainmakers or star associates may be unable to hire who they want because the new lawyer's previous work may be in conflict with the work of an existing firm's client. Any time a new lawyer is hired or a new client is brought on, there exists a possibility of a conflict. Sometimes this even means that lucrative business must be sacrificed because of the existing presence of a minor retainer. (7) Every time a conflict check is run, firms must decide whether a conflict arises and whether it can be cured. This task is further complicated by complex rules and unique facts.

Having said that, and despite the difficulty that may be encountered in hiring lawyers as a result of the Heenan Blaikie situation, any concerns that may be raised over conflicts of interest are ultimately confined in scope and complexity when they arise in a single jurisdiction or country. This is because a uniform rule is applied. For example, when a Canadian law firm merges or dissolves, the same rule applies regardless of whether the lawyer is joining a new firm in British Columbia, Alberta, or Ontario. (8)

But in a world of increasing globalization and law firm expansion, the situations that give rise to conflicts of interest problems are not always confined to one jurisdiction or country. Consider the following scenario:

Mary is a finance partner who works primarily out of Firm A's Toronto office. She spends some of her time working out of Firm A's New York office and is licensed to practice in both Ontario and New York. She has been hired by BorderCo, which is looking to build a pipeline across the Canada--United States border. As part of its development strategy, BorderCo wishes to acquire TexCo, a company specializing in pipeline design and construction. BorderCo is incorporated in and maintains its head office in New York. TexCo's head office is in Texas but the company is incorporated in Delaware. Midway through the deal, a large national firm dissolves and Mary's firm has an opportunity to hire Chad, an industry expert in oil and gas acquisitions and divestitures. Chad has a big book of business and would be a great addition to the firm. He has worked for most of his career in Texas, but is also licensed to practice in Alberta. Mary's firm would like to hire Chad in its Alberta office to do some work for some clients in the oil sands industry. However, on a previous transaction, Chad worked for TexCo on a pipeline development project in the Marcellus Shale in Pennsylvania although the retainer has since been terminated. BorderCo plans to tie in TexCo's existing Pennsylvania pipeline into BorderCo's Ontario pipeline networks. TexCo is unwilling to waive conflicts. Can the Alberta office of Mary's firm hire Chad? Which jurisdiction's conflicts of interest rules should apply to determine whether Chad may join Mary's firm?

If Canadian or Delaware law applies, Chad is free to join Mary's firm, subject to appropriate institutional mechanisms such as ethical screens so as to prevent the dissemination of TexCo's confidential information to other members of Mary's firm. (9) If New York or Texas law applies, ethical screens cannot be applied to cure the conflict and Chad would be prohibited from joining Mary's firm due to the conflict of interest. (10)

Unfortunately, the current state of the law regarding conflicts of interest in both Canada and the United States does not resolve this problem. No uniformly accepted choice of law rule applies to the law governing lawyers; (11) both lawyers and their law firms have little direction as to how to resolve conflicts of interest problems when multiple jurisdictions and different law-governing-lawyers frameworks are implicated. (12) Every day, modern law firms face new conflicts of interest problems as lawyers move and new clients or matters are taken on. Each time a firm runs a conflicts check that involves another jurisdiction, the question of which laws apply and govern must be addressed, yet lawyers have no guidance as to how to undertake this task.

This paper seeks to address this problem. It attempts to answer the question: when multiple jurisdictions are implicated as a result of multiple licences, which jurisdiction's law governing lawyers should apply?

Part I investigates the three separate issues that arise when a lawyer or law firm has a potential conflict of interest and analyzes them in the context of jurisdiction and extraterritoriality. Part II examines both Canadian and American law dealing with conflicts of interest, noting the commonalities and differences between them. Part III evaluates whether the current choice of law rules for agency or contract may apply as is to the law governing lawyers. Part IV proposes a principled approach, based in the "proper law," to determine which rule should apply when faced with conflicting rules in the law governing lawyers. Part V applies the proposed framework to the conflicts of interest test scenario above.

  1. The Tripartite Conflicts of Interest Problem--Resolving Issues of Jurisdiction and Extraterritoriality

    When a conflict of interest issue arises, three separate concerns must be addressed. First, the lawyer or firm may face a motion for disqualification, preventing further representation of a client on the transaction or dispute. (13) Second, the individual lawyer might be subject to disciplinary proceedings in front of a provincial law society or state bar. (14) Third, the client may sue the lawyer or firm for breach of fiduciary duty. (15) Each of these scenarios raises different considerations regarding jurisdiction, extraterritoriality, and ultimately, choice of law. Questions of jurisdiction and extraterritoriality must be addressed before considering choice of law. If a tribunal (16) does not have jurisdiction over either the matter or the parties, then no conflict of laws problem arises--a tribunal without jurisdiction may not affect substantive rights. Thus, in the context of conflicts of interest, without proper jurisdiction, the court cannot disqualify counsel, nor can a disciplinary panel sanction a lawyer. If the laws or rules governing the lawyer's conduct do not apply extraterritorially, no problem of competing rules or dual obligations arises because the lawyer only has to comply with the law of the jurisdiction in which the lawyer is located.

    This article analyzes the first and second scenarios as the most prevalent and raising the most uncertainty when it comes to...

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