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Bankruptcy Litigation

Third Circuit Holds Ethical Screen Insulates Side-Switching Lawyer’s New Firm

The Third Circuit recently affirmed a bankruptcy court’s denial of a defendant’s motion to disqualify the plaintiff’s law firm in a large adversary proceeding, holding that it had not abused its discretion because the plaintiff law firm had “complied with” ABA Model Rule of Professional Conduct 1.10(a)(2).

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The Third Circuit recently affirmed a bankruptcy court’s denial of a defendant’s motion to disqualify the plaintiff’s law firm in a large adversary proceeding, holding that it had not abused its discretion because the plaintiff law firm (W) had “complied with” American Bar Association Model Rule of Professional Conduct 1.10(a)(2). In re Maxus Energy Corp., 2022 WL 4113656, *4 (3d Cir. Sept. 9, 2022). According to the court, a lawyer (B) who “moved from” the defendant’s law firm “to the [plaintiff’s] firm” was not cause for W (the new firm) to be disqualified. W’s ethical “screen was sufficient to prevent [B’s] conflict from being imputed to the entire firm [W].” Id. at *1. The Model Rules, applicable here, did not impute B’s “conflict to her new firm,” said the court, because “a timely screen, together with certain other requirements,” prevented “conflict imputation.” Id.

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