A Big Week for Conflicts of Interest

We’ve commented before on the CBA’s work on conflicts of interest, and on how to avoid conflicts, so here are three news items on conflicts.

The first hottest news is that the American Bar Association in Boston this afternoon approved a major change to the rules concerning migrating lawyers. Effectively the change moves closer to the Canadian position articulated by Sopinka J. in MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235.

Last week, the Delaware Court of Chancery handed down an interesting – though short – judgment in the form of a letter from judge to counsel in the case of Rohm and Haas Co. v. The Dow Chemical Co., et al.. Wachtell Lipton Rosen & Katz was able to represent chemical maker Rohm & Haas Co. in a suit over Dow Chemical Co.’s stalled $15.3 billion buyout, despite its prior mandates for Dow. Wachtell had represented Rohm & Haas for months in the merger negotiations without any protest by Dow.

If Dow truly felt that they were a current client of Wachtell and that they should not be ‘across the table’ from their own lawyers, then Dow should have objected at the outset of the negotiations of the merger agreement that eventually lead to this litigation rather than waiting until this expedited litigation was commenced to attempt to make Rohm and Haas obtain new counsel.

The court was very concerned about the potential for abuse in conflict allegations. It’s not enough to show that the rules of conduct have been breached in a purely technical sense. The court must be convinced that the information obtained in the earlier mandate could be used against the client in the current case, and that there would be a material threat to the fair and efficient administration of justice. Here’s what the NYT blog said about the decision.

The judge commented:

Dow has failed to convince me that the information Wachtell had access to regarding Dow’s strategies and asset values in 2006 and 2007 will substantially advance the interest of Rohm and Haas in this litigation… Additionally, Wachtell has assured the court that its attorneys who obtained confidential Dow information have not and will not share Dow’s client confidences with the Wachtell attorneys working on this matter.

Finally, the CBA at its Lake Louise mid-winter meeting on Saturday will consider drafting changes to the CBA Code to implement the recommendations of the Jolliffe task force. We’ll blog from the Rockies on the results next weekend.

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