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ABA Approves Model Rule for Ethical Disclosure of Client Information Between Law Firms

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This week, the American Bar Association House of Delegates approved for the first time an amended model rule that allows ethical disclosure of client information when lawyers move from one firm to another law firm.

This has been a bone of contention for lawyers seeking to move from one law firm to another. Previously, ABA ethics rules did not specify whether lawyers involved in law firm merger talks were allowed to disclose identities of clients or client specific information like the amount of revenue generated by client matters. The new model rule asserts that such disclosures are required to determine whether client conflicts exist between a lawyer and the prospective firm. However, the model rule says these disclosures need to be confined only to the identities of clients and should not include detailed billing or other financial information.

Though the rule is only advisory, typically, state bars adopt the ABA model rules. Currently, many state bar associations, including the bars of New York, Illinois and California, do not have rules that address the issue or specify the nature of client information that may be disclosed during the hiring of lateral partners or during merger discussions between law firms.

However, some state and city bars including Colorado and Boston, have rules in this respect that are very close to the new ABA rule and confine client disclosures within a limited area to determine conflicts of interest.

Jamie Gorelick, the co-chair of the ABA Commission on Ethics 20/20, which recommended the rule said “our hope is that with clear rules there will be less disclosure of client information that shouldn’t be disclosed.” Gorelick further said that this rule would bring “more certainty by both lawyers and clients as to what can be said.”

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Michael Traynor, another co-chair of the commission, said that the rule was made to ensure a law firm can’t use client information from a lawyer during hiring or merger discussions as an “insidious device to open the door to any trade secrets.”

At the ABA meeting in Chicago, the new model rule regarding disclosure of client information between law firms drew opposition from the ABA litigation section. Critics of the new rule said that lawyers should receive consent from clients before disclosing any information pertaining to them. However, the ABA House of Delegates, rejected the opposition on Monday by a voice vote. Now, it depends upon the state bar associations whether they would adopt the new rule or not.

Lisa Bang-Jensen, a spokeswoman for the New York State Bar Association said “it’s a complicated change and we haven’t begun to study whether to advance it in New York.”

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