Maritrans GP Inc. v. Pepper, Hamilton & Scheetz

*264 NIX, Chief Justice,

dissenting.

In the instant matter the majority has concluded that appellee, Pepper, Hamilton & Scheetz (“Pepper”), was properly enjoined from representing Maritrans’ competitors because of the significant risk of the disclosure of confidential information. The majority finds the creation of the relationship which harbors this risk to be a breach of Pepper’s fiduciary duty to Maritrans. I believe that in reaching this result, the majority overlooks the significant body of case law that has developed in this area, as well as a key factor that renders its conclusion unreasonable.

The Chinese wall defense 1 is set forth in the Model Rules of Professional Conduct, Rule l.ll. 2 The procedure established is one whereby a single attorney or group of attorneys who has represented a particular client is isolated from another attorney or attorneys within the same firm who represent a client whose interests are substantially related but materially adverse to those of the initial client. The goal of such a procedure is to minimize the potential for the transmission of confidential information between attorneys representing clients with competing interest.

*265 The Chinese wall defense is asserted in the following manner. First, in attempting to have an attorney disqualified, the former client must show that matters embraced within a pending lawsuit, in which his former attorney appears on behalf of an adversary, are substantially related to matters wherein the attorney had previously represented the former client. Comment, The Chinese Wall Defense to Law Firm Disqualification, 128 U.Pa.L.Rev. 677 (1980). Once this burden, called the “substantial relationship test,” is met, and the complainant has shown that the former representation exposed the attorney to confidences or secrets arguably pertinent in the present dispute, a rebuttable presumption arises that those confidences were shared. Freeman v. Chicago Musical Instrument Co., 689 F.2d 715, 723 (7th Cir.1982); Novo Terapeutisk Laboratories v. Baxter Travenol Labs., 607 F.2d 186, 196 (7th Cir.1979).

To overcome this presumption, the Chinese wall defense is asserted, and the attorney and firm must demonstrate sufficient facts and circumstances of their particular case to establish the probable effectiveness of the wall. The Chinese Wall Defense, supra, at 704. The factors to be considered in the acceptance of the Chinese wall defense are the substantiality of the relationship between the attorney and the former client, Silver Chrysler Plymouth v. Chrysler Motors, 518 F.2d 751 (2d Cir.1975); the time lapse between the matters in dispute, Westinghouse Electric Corp. v. Rio Algom Ltd,., 448 F.Supp. 1284, 1309-10 (N.D.Ill.1978); the size of the firm and the number of disqualified attorneys, Gas-A-Tron v. Union Oil, 534 F.2d 1322 (9th Cir.1976); the nature of the disqualified attorney’s involvement, NCK Org. v. Bregman, 542 F.2d 128 , 133 n. 7 (2d Cir.1976); and the timing of the wall. Relevant features of the wall itself include the following:

a. the prohibition of discussion of sensitive matters

b. restricted circulation of sensitive documents

c. restricted access to files

*266 d. strong firm policy against breach, including sanctions, physical and/or geographical separation

ABA Opinion 342, 62 ABA J. 517, 521 (1976). 3

Applying these factors to the instant matter, we would be inclined initially to agree with Maritrans’ assertions that the wall in this case was probably defective. Despite the size of the firm and the number of attorneys involved, the timing of the wall was delayed in relation to the existence of the conflict. The relationship between Maritrans and Pepper was substantial, as was Messina’s involvement with Maritrans. Of particular significance is the fact that the conflict existed not merely within the firm as a whole but within a single attorney who sought to represent competing clients.

These factors reveal serious concerns which must have been patently obvious at the time the conflict arose. Nevertheless, Maritrans was informed of this peculiar arrangement and consented to it It is well-settled in the field of legal ethics that a client’s consent, upon full disclosure of a conflict of interest, is sufficient to permit the attorney to continue the otherwise objectionable representation. Higdon v. Superior Court, 227 Cal.App.3d 1667 , 278 Cal. Rptr. 588 (1991); Rivera v. Chicago Pneumatic Tool Co., 1991 WL 151892 , 1991 Conn.Lexis 1832 (Conn.Super.); Lansing-Delaware Water District v. Oak Lane Park, Inc., 248 Kan. 563 , 808 P.2d 1369 (Kan.1991); McCarthy v. John T. Henderson, Inc., 246 NJ.Super. 225, 587 A.2d 280 (1991). See also Parker v. Volkswagenwerk Aktiengesellschaft, 245 Kan. 580 , 781 P.2d 1099 (1989); Superintendent of Insurance v. Attorney General, 558 A.2d 1197 (Me.1989). Thus, while Maritrans’ concerns may have been legitimate, their initial acquiescence must be construed as a forbearance of any objections based upon the potential for breach *267 of confidentiality. Having consented to the arrangement, they are now bound by their consent until such time as an actual breach of confidentiality occurs. As was previously found by this writer, Maritrans G.P., Inc. v. Pepper, Hamilton & Scheetz, 524 Pa. 415 , 573 A.2d 1001 (1990) (Memorandum Opinion), and as Maritrans implicitly concedes, Appellant’s Brief at p. 58, no actual disclosure of confidential information has occurred. 4 Maritrans’ prior consent amounts to a waiver of their right to an objection based upon the fear of disclosure.

Accordingly, I dissent.

. The procedure set forth in Rule 1.11 ABA Model Rules of Professional Response, applies specifically to former government attorneys. But see infra note 3.

. In Pennsylvania, the same procedure is found at Rule 1.10(a) and (b) of the Rules of Professional Conduct. That Rule provides as follows:

(a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7, 1.8(c), 1.9 or 2.2.

(b) When a lawyer becomes associated with a firm, the firm may not knowingly represent a person in the same or substantially related matter in which that lawyer, or a firm with which the lawyer was associated, had previously represented a client whose interests are materially adverse to that person and about whom the lawyer had acquired information protected by Rules 1.6 and 1.9(b) that is material to the matter unless:

(1) the disqualified lawyer is screened from any participation in the matter and is apportioned no part of the fee therefrom; and

(2) written notice is promptly given to the appropriate client to enable it to ascertain compliance with the provisions of this rule.

. Although the ABA opinion limits its application of the Chinese Wall to situations where the private-firm attorney’s conflict exists because of prior government employment, case law indicates that the concept has wider applicability. See generally, Comment, The Chinese Wall Defense to Law Firm Disqualification, 128 U.Pa.L.Rev. 677 (1980).

. Although Maritrans repeatedly insists that it has no way of knowing whether confidences have actually been disclosed because attorney-client privilege makes that fact difficult, if not impossible, to ascertain, it does not deny conceding the absence of disclosure at the prior proceeding before this Court. Moreover, the majority in the instant appeal concedes that the concern is not that actual disclosure has occurred, but that the circumstances create significant potential for such disclosure.