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Lawyers must check for conflicts

New rule amendments by the Supreme Court of Virginia mean lawyers cannot turn a blind eye to potential conflicts of interest with their clients.

A year after the Virginia State Bar petitioned the court to tighten law firm conflict requirements, the court made the recommended changes to Rule 1.10 of the Rules of Professional Conduct on July 31.

The changes are intended to avoid a situation in which a lawyer circumvents an imputed conflict of interest by avoiding the knowledge that another firm lawyer has a conflict.

The bar’s request for the change followed a 2013 Supreme Court ruling exonerating an Eastern Shore attorney who kept his divorce client even after the other spouse revealed confidences to the attorney’s partner.

VSB lawyers failed to prove that the attorney actually knew that his partner was disqualified from the case, the court held.

Under the new language for Rule 1.10, the standard in that situation would be whether the lawyer “knows or reasonably should know” that a partner is conflicted out.

The court also added a mandate for law firms to use conflict-check systems:

“A lawyer or firm should maintain and use an appropriate system for detecting conflicts of interest. The failure to maintain a system for identifying conflicts or to use that system when making a decision to undertake employment in a particular matter may be deemed a violation of Rule 1.10(a) if proper use of a system would have identified the conflict,” the new comment reads.

The changes were recommended to the court by a vote of the Bar Council at the VSB annual meeting in June of last year. At the time, VSB ethics committee chair Marni E. Byrum of Alexandria said she hoped the change would highlight the need for systematic conflict checks at law firms.

“I was stunned to learn some attorneys do not know they have to have conflict checks in their firms,” Byrum said at the time.

VSB Ethics Counsel James M. McCauley said the committee sought to close a gap in the rule.

“It occurred to the committee that Rule 1.10 needed to be amended to require actual knowledge or constructive knowledge of a conflict,” McCauley said.

In the discipline case decided by the high court, Thomas L. Northam of Accomac stood accused of violating the imputed disqualification rule, Rule 1.10 (a), in the handling of a 2010 divorce case.

He accepted a husband’s divorce case after his partner declined to represent the wife. The partner had received confidential information from the wife before the partner realized he could not take her case.

Northam argued the rule in effect at the time did not impose “strict liability” and a lawyer had to “knowingly” ignore an imputed conflict.

The court agreed. The word “knowingly” is a “separate and distinct element of the Rule that must be proven before a violation can be imposed,” wrote Justice LeRoy F. Millette Jr. for a six-justice majority.

The Supreme Court reversed and vacated the VSB’s admonition of Northam and dismissed the case in Northam v. Va. State Bar (VLW 013-6-020).

The rule change now approved by the court strikes the word “knowingly” from the rule, replacing it with the element that the lawyer “knows or reasonably should know.”

“The lawyer can’t bury their head in the sand and not have a system to track and detect conflicts and then say, ‘Well, I didn’t know,’” McCauley said.

Updated Aug. 5 to add comment from McCauley.

VLW 013-6-020

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