Plein v. USAA Cas. Ins. Co.
195 Wn.2d 528 (2020) (2020)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under Washington's Rules of Professional Conduct 1.9(a), a law firm is not barred from representing a new client against a former organizational client unless the current matter is factually related to the prior representation such that there is a substantial risk the firm obtained confidential factual information in the prior representation that would materially advance the new client’s position.
Facts:
- Keller Rohrback LLP (Keller) and its team, led by Irene Hecht, represented USAA and its affiliated companies in over 165 bad faith litigation matters in Washington between 2007 and 2017.
- During its representation, Keller gained access to USAA's business customs, confidential claims handling materials, adjuster thought processes, in-house attorney strategies, and business/litigation philosophies, as well as electronic access to internal proprietary documents and claim databases.
- Specifically, between 2010 and 2012, Keller defended a USAA subsidiary in the Cueva matter, which involved allegations of bad faith related to a fire and smoke damage claim and the failure to provide adequate alternative housing.
- In 2016, a fire damaged Richard and Debra Plein’s home, and USAA acknowledged coverage under their homeowners' insurance policy.
- On USAA’s recommendation, the Pleins hired The Sterling Group, Inc. to repair the damage, but Sterling allegedly concealed unrepaired damage and performed deficient work.
- USAA subsequently declined to pay the Pleins for additional repairs to their home or for the cost of temporary living arrangements while their home was uninhabitable.
- The Pleins hired attorney Joel Hanson, who then consulted with and subsequently hired Keller attorneys William Smart and Ian Birk to represent them in a lawsuit against USAA and Sterling Group, alleging insurance bad faith and Consumer Protection Act violations.
Procedural Posture:
- Richard and Debra Plein (plaintiffs) sued USAA Casualty Insurance Company and The Sterling Group, Inc. in King County Superior Court (trial court), alleging insurance bad faith and other claims.
- The Pleins subsequently hired attorneys William Smart and Ian Birk from Keller Rohrback LLP to represent them.
- USAA demanded that Keller withdraw from representation due to a conflict of interest, threatening to move for disqualification.
- The Pleins moved for a ruling regarding the asserted conflict of interest in the trial court.
- The King County Superior Court (trial court) issued an order concluding that the Plein matter was factually distinct from and not substantially related to Keller’s prior representation of USAA, thus allowing Keller to continue representing the Pleins.
- USAA (appellant) moved for discretionary review of the trial court’s order.
- The Court of Appeals (intermediate appellate court) granted review and reversed the trial court's decision, holding that RPC 1.9(a) precluded Keller’s representation of the Pleins.
- The Pleins (petitioners/appellants) sought review from the Washington Supreme Court (highest court).
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does RPC 1.9(a)'s 'substantially related' language bar a law firm from representing a new client against a former organizational client when the firm previously handled a broad type of legal problem for the former client, but the current matter is factually distinct, unless there is a substantial risk that confidential factual information from the prior representation would materially advance the new client's position?
Opinions:
Majority - Gordon McCloud
No, RPC 1.9(a) does not bar Keller's representation because USAA failed to show a 'substantial risk' that Keller obtained 'confidential factual information' that would 'materially advance' the Pleins’ case, as the current matter is factually distinct from Keller's prior work for USAA. The court reviews the interpretation of RPC 1.9(a) and its comments de novo, asserting that the 2006 amendments to the RPCs and their comments superseded prior appellate court tests for 'substantially related' matters. The burden of proving a substantial relationship rests with the former client (USAA) seeking disqualification. The court emphasizes Comment 2 to RPC 1.9, which states that a lawyer who recurrently handled a type of problem for a former client is not precluded from representing another client in a 'factually distinct problem of that type.' Furthermore, Comment 3 clarifies that matters are 'substantially related' if they involve the same transaction or legal dispute, or if there is a 'substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client’s position in the subsequent matter.' The court distinguished 'general knowledge of an organizational client’s policies and practices' (not disqualifying) from 'knowledge of specific facts gained in a prior representation that are relevant to the matter in question' (ordinarily disqualifying). Citing federal appellate decisions in Watkins v. Trans Union, LLC and Duncan v. Merrill Lynch, Pierce, Fenner & Smith, Inc., the court stressed that the focus must be on the factual relationship between the prior and current matters. The court explicitly rejected the 'playbook' approach to disqualification, which would disqualify a lawyer based on general insight into a former client's strategies, as well as a separate, generalized 'duty of loyalty' approach, finding them inconsistent with the current RPCs. The court noted that RPC 1.9(c) already protects client confidences without necessarily requiring outright disqualification of the entire firm in factually distinct matters.
Analysis:
This case significantly clarifies the standard for attorney disqualification under RPC 1.9(a) in Washington, aligning the state's jurisprudence more closely with the ABA Model Rules. By explicitly rejecting the 'playbook' and broad 'duty of loyalty' approaches, the court establishes a higher threshold for disqualification, requiring the former client to demonstrate a substantial risk that specific, confidential factual information from a prior, factually related matter would materially advance the new client's position. This ruling provides greater clarity for attorneys on conflicts of interest, potentially making it more feasible for lawyers to represent new clients against former organizational clients when the underlying disputes are factually distinct, even if of the same general 'type' of litigation. The emphasis on 'factual' information over 'general knowledge' or 'strategies' limits the scope of imputed conflicts within law firms and reduces the likelihood of disqualification motions being used strategically to deprive a party of chosen counsel.
