Given the tough legal market and the resulting fragmentation within the legal community, it was inevitable that lawyers would find themselves battling over trade secrets as law firms splinter and partners attempt to take their books of business else where. When it comes to lawyers and law firms, nothing is ever simple, and there are a number of nuances to these disputes that make them especially challenging.
Let’s talk about the recent cases. The Wall Street Journal is reporting that Joseph C. Maher II, a former attorney from the renowned plaintiffs’ law firm, Weitz & Luxenberg PC, has filed a lawsuit against his old firm accusing it of “possessing a cache of confidential files from a competitor that allegedly could be used to earn millions of dollars.” Maher, who was also the head of Weitz & Luxenberg’s Los Angeles office, claims the firm had a massive database on its internal network of confidential client and legal files that it allegedly purloined from one of its leading competitors, the Texas-based law firm, Waters & Kraus LLP. The two law firms have offices across the country and compete for similar clients who may have asbestos-related claims.
This is not the only high profile case involving a dispute over lawyers and trade secrets. Last month, SNR Denton’s lawsuit with Huron Consulting over the hiring of a team of consultants was back in the news. Huron sued SNR Denton after the law firm hired health care partner Lisa Murtha, a former Huron consultant, whom Huron claims breached her noncompete agreements by recruiting other Huron employees to join her in jumping to the firm. Also last month, Elliott Greenleaf & Siedzikowski sued a former partner and his new firm for allegedly installing software on Elliott Greenleaf’s computers that allowed him to have continued access to the firm’s files through the “cloud.”
These trade secret disputes between lawyers raise a number of tricky issues. The most obvious are:
No. 1: Can lawyers or law firms impose agreements on their associates or partners restricting them from taking clients? As I wrote last month in my post about the GPC v. Wi-LAN case over the hiring of a former General Counsel, the answer is generally “no.” Most states have adopted Ethical Canon 5.6 or its counterpart DR 2-108 that forbid restrictive covenants limiting lawyers because they interfere with a client’s ability to choose his or her own lawyer (the apparent exceptions being Arizona and California, which I am told have rejected the categorical rule). That being said, there are occasional outlier decisions that may fail to apply this majority rule, as this post from Fisher & Phillips’ Non-Compete and Trade Secrets Blog demonstrates.
For those attorneys interested in finding out more about these issues or what their states may have to say, check out Russell Beck’s article for New England In-House, Marshall H. Tanick and Phillip J. Trobaugh’s article on Minnesota law (“Non-Competes for Professionals: It is Not for Amateurs”), and this thorough discussion going on within Linked In’s Noncompete Lawyers Group.
No. 2: Are lawyers subject to trade secret laws? Absolutely. So long as they abide by the ethical canons, lawyers should be able to protect their own confidential information and trade secrets. Last month, Todd Sullivan’s Trade Secrets Blog wrote a post about a Texas case where a court granted a TRO to prevent a law firm’s former office manager from “teaching” a competitor how to do asbestos litigation in return for an agreement to split the proceeds 50-50. According to Todd, the trade secrets addressed the firm’s “strategy and method of prosecuting asbestos cases and other mass toxic tort cases.”
No. 3: What can lawyers and law firms do to protect themselves? Practice what we preach. In my experience, lawyers are extraordinarily careful about protecting their clients’ confidences. However, when it comes to their own potential trade secrets, I suspect most lawyers are more concerned about practicing law, protecting their clients, and bringing in more clients than they are about protecting themselves (a not uncommon trait among professionals; doctors, for example, are notorious for ignoring the business aspects of their practices so they can focus on practicing medicine). As I wrote last month, the consequences of this inattention can manifest themselves in dangerous ways, as lawyers are now perceived as soft on security, at least by cyberthieves and hackers.
Similarly, if you and a partner or law firm are going to part ways (or looking to bring a new partner aboard), make sure that you first consult the ethical guidelines in your state about how to handle these situations (when and how to approach clients, etc.). Then make sure that you conduct yourself in the same manner that you would recommend to a client.
The takeaway? It is a rough and tumble world, so govern yourselves accordingly!