The Business Litigation Blog

Legal Malpractice Triggered After Conflict of Interest is Discovered

The United States District Court of the Southern District of New York recently disqualified the law firm of Holland & night from representing a plaintiff, First NBC Bank, in a lawsuit against Murex, LLC involving the sale of allegedly bogus receivables by Murex to First NBC.

 

Murex moved to disqualify Holland & Knight as First NBC's counsel in the lawsuit on the basis that Murex is also a client of Holland & Knight following Murex's refusal to consent to the concurrent representation.

 

Murex's motion laid out the facts of the apparent conflict.  First NBC Bank is a Louisana-based bank that retained litigators in Holland & Knight's Atlanta office to prepare and pursue its claims against Murex. Prior to First NBC's retention of the firm, Murex had retained lawyers in Holland & Knight's Washington, D.C., office for regulatory work. Holland & Knight's representation of Murex initially began as a lobbying representation, but it eventually grew to include legal services. Notably, Holland & Knight represented Murex against an enforcement action that the Environmental Protection Agency had threatened. Murex contended in its motion that the evolution of the representation triggered the attorney-client relationship and the Rules of Professional Conduct.

 

Holland & Knight's Atlanta office had run a conflict-check prior to engaging First NBC and discovered that the D.C. office was representing Murex, they assumed that the representation was solely nonlawyer lobbying such that no conflict was present. Holland & Knight opposed the motion to disqualify, arguing that there is no appearance of disloyalty and that Holland & Knight's access to Murex's confidential information would not benefit First NBC Bank in a trial between First NBC and Murex.

 

The Southern District of New York disagreed, finding that Holland & Knight's representation of First NBC Bank against Murex would create an appearance of disloyalty, and, while it is impossible to foresee all issues that will be raised at trial, the issues raised by the pleadings prepared by Holland & Knight inevitably relate to confidential information regarding Murex's business practices, corporate culture, and regulatory framework—all information that Holland & Knight has or had access to as a result of the D.C. office's representation of the company—such that Murex's disqualification motion had to be granted.

 

Rule 1.7 of the Model Rules of Professional Conduct states that a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. The Rule allows for concurrent representation in very limited circumstances and with informed consent, in writing, by the affected clients. Failure to abide by the Rule regarding conflicts of interest among clients may be legal malpractice. If you believe you have a legal malpractice claim, contact Patterson Law Firm to see how we can help. 

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