In January 2013, the New York City Bar Association issued Formal Opinion 2013-1 (the “Opinion”)1 explaining the duties owed by lawyers under Rule 1.18 of the New York Rules of Professional Conduct (the “Rule”) to prospective clients even when no lawyer-client relationship ensues.2 Rule 1.18 was adopted in 2009 to fill a gap in the governing New York attorney ethics rules, which previously did not define the duties owed by lawyers to prospective clients other than in case law. As reflected in Comment 1 to the Rule, the Rule addresses duties to prospective clients after beauty contests and other preliminary meetings, and seeks to “balance the need for protection of those who consult lawyers about a possible representation with the need for freedom of the parties to decide not to pursue the representation.” Thus, while the Rule imposes some substantial responsibilities to protect the interests of prospective clients, the responsibilities are not as extensive as those owed to former and current clients and include exceptions where informed consent is obtained or ethical screens are used.
As interpreted by the Opinion, Rule 1.18 imposes two primary duties on lawyers who have participated in a “beauty contest”3 with a prospective client,4 but were ultimately not retained by the prospective client: (1) lawyers are “restricted from using or revealing information learned in the consultation to the same extent that a lawyer would be restricted with regard to information of a former client” and (2) lawyers “may not represent a client with materially adverse interests in the same or a substantially related matter if the information received from the prospective client could be significantly harmful to the prospective client in that matter.” (Opinion at 3). The Opinion explains these restrictions and their exceptions and includes several hypothetical scenarios to illustrate the application of the Rule.
I. Restrictions on Using and Disclosing Prospective Client Information and Relevant Exceptions
Rule 1.18(b) provides that “[e]ven when no client-lawyer relationship ensues, a lawyer who has had discussions with a prospective client shall not use or reveal information learned in the consultation, except as Rule 1.9 would permit with respect to information of a former client.” Noting that Rule 1.9 and related Rule 1.65 only restrict the use and disclosure of “confidential information,”6 the Opinion thus interprets Rule 1.18(b) to mean that the restriction on disclosing prospective client information only applies to “confidential information” learned in a consultation with a prospective client and that similarly the restriction on using prospective client information only applies to “confidential information” learned in a consultation with a prospective client where the use of the confidential information would “disadvantage” the prospective client7, and that the restrictions on both the use and disclosure of the prospective client’s confidential information would also be subject to the exceptions in Rules 1.9 and 1.6 in which confidential information may be used or disclosed. (Opinion at 4-5).
The Opinion concludes that two additional exceptions contained in Rule 1.18(d) also apply to the restrictions of Rule 1.18(b). Although Rule 1.18(d) does not expressly contemplate the use of informed consent and ethical screens to comply with the restrictions on the use or disclosure of a prospective client’s confidential information, the Opinion concludes that “these means can also be used to comply with the restrictions on using or revealing information.” (Opinion at 5). Reasoning that Rule 1.18(b) incorporates the relevant exceptions of Rule 1.6, which permits the use and disclosure of confidential information where the client has given “informed consent,” the Opinion finds that Rule 1.18(b) “thus should permit the use of informed consent to avoid the restriction.”8 Id. The Opinion also concludes that “if a law firm implements an ethical screen as contemplated in Rule 1.18(d), it may rely on the screen to comply with paragraph (b) as well as paragraph (c).”9
II. Restrictions on Adverse Representation and Relevant Exceptions
Rule 1.18(c) provides that “a lawyer subject to paragraph (b) shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in the matter, except as provided in paragraph (d). If a lawyer is disqualified from representation under this paragraph [(c)], no lawyer in a firm with which that lawyer is associated may knowingly undertake or continue representation in such a matter, except as provided in paragraph (d).” The Opinion concludes that the restriction on adverse representation applies only where the lawyer is already restricted from disclosing or using confidential information of the prospective client under Rule 1.18(b) and has received information through the consultation with the prospective client that “could be significantly harmful”10 to the prospective client in the new matter. (Opinion at 4-6). Subject to several exceptions, where a lawyer is disqualified, the disqualification will also apply to all other lawyers in the firm. Id. at 4. The Opinion finds that Rule 1.18(c) is less restrictive than the limitations on adverse representation in the context of former and current clients, which apply whether or not the lawyer received information that “could be significantly harmful” and regardless of whether the representation involves “the same or a substantially related matter.” Id. at 5-6; see Rules 1.7 and 1.9.
The Opinion summarizes the two exceptions to the restriction on adverse representation: (1) representation by the otherwise disqualified lawyer or affiliated law firm is permissible if “both the affected client and the prospective client have given informed consent, confirmed in writing”11 and a “reasonable lawyer would conclude that the firm would be able to provide competent and diligent representation in the matter” and (2) representation by the disqualified lawyer’s law firm is permissible “if the disqualified lawyer took reasonable steps12 to limit his or her exposure to disqualifying information in discussions with the prospective client and the firm takes specific steps to implement an effective ethical screen and notifies the prospective client of the representation and the screening measures taken”13 and a “reasonable lawyer would conclude that the firm would be able to provide competent and diligent representation in the matter.” (Opinion at 4; see Rule 1.18(d)).